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Haslam Pledges ‘Full Speed Ahead’ in 2015 State of the State

Press release from Tennessee Gov. Bill Haslam; February 9, 2015:

Governor’s budget proposal prioritizes K-12 and higher education, jobs  

NASHVILLE – Tennessee Gov. Bill Haslam tonight delivered his 2015 State of the State and Budget address before a joint session of the 109th General Assembly in the House Chamber.

During the speech, he promised to move “full speed ahead” in serving Tennessee taxpayers and highlighted many of the state’s successes.

“I stand here tonight to tell you that the state of our state is enviable in many ways,” Haslam said. “There are a lot of good things happening in Tennessee, and they’re being recognized in significant ways across the country.”

Haslam noted several of the state’s accomplishments, including:

  • Nearly 225,000 new private sector jobs have been created in Tennessee since 2011, and Tennessee holds the designation of “State of the Year” in economic development for an unprecedented second year in a row.
  • Tennessee leads the country in academic achievement gains and through the Tennessee Promise is the first state ever to promise high school graduates two years at a community or technical college free of tuition and fees.
  • This year, out of 65,000 high school seniors, 58,000 applied for the Tennessee Promise and 9,200 adult Tennesseans signed up to be volunteer mentors for these students.
  • Tennessee has the lowest debt per capita of any state and among the lowest tax rates.

Haslam also emphasized the importance of education in Tennessee – both K-12 and higher ed.

“I truly believe that getting education right is critical to the well-being of our state – today and in the future,” Haslam said. “We have to keep going full speed ahead.  We can’t afford to go backwards.  We’ve come too far to sell ourselves short. It would be an injustice to our students, to our teachers, to Tennessee families, and to ourselves.”

He underscored the state’s efforts to ensure a strong workforce through a focus on workforce development and his Drive to 55 initiative that aims to raise the percentage of Tennesseans with a certificate or degree beyond high school from 32 to 55 by the year 2025.  Part of that effort is the Tennessee Promise.

“For the last 30 years, Tennessee’s greatest need has been for better trained workers who can fill the jobs that companies want to bring here. We think the Tennessee Promise is a game changer.

“But the reality is that just reaching high school graduates won’t be enough to reach our goal,” he continued.  “In Tennessee, there are nearly one million adults with some post-secondary credit but without a degree. We have to figure out ways to reconnect those adults and remove the barriers that are preventing so many Tennesseans from earning their certificate or degree, which will lead to a better job and future.”

As part of the address, the governor outlined his budget proposal for Fiscal Year 2015-2016 which reflects $300 million in revenue growth, $500 million in cost increases and $200 million in reductions.

“Every year we have a limited amount of new money that is available from our revenue growth,” Haslam said.  “That new money rarely keeps pace with our budget obligations and growing costs for education and health care.  That’s why it is so important that our state has built a track record of fiscal restraint.

“That’s why we have to try different approaches that will help us keep costs down while increasing quality and outcomes in health care.”

The governor’s budget proposal includes nearly $170 million for K-12 education, including:

  • $100 million dollars for increasing teacher salaries, which amounts to a four percent pool that local education associations (LEAs) will have available as they make local decisions to increase teacher pay;
  • Nearly $44 million to fully fund the Basic Education Program; and
  • $5 million to create the Educators’ Liability Trust Fund to offer liability insurance to Tennessee teachers at no cost to them.Notable higher education investments include:
  • $260 million for capital projects, including new science facilities at Jackson State Community College and the University of Tennessee, nearly $25 million for improvements to colleges of applied technology across the state and funding for a fine arts classroom building at East Tennessee State University;
  • $25 million to fully fund the Complete College Act formula; and
  • $10 million for need-based scholarships for students;

The budget also includes specific workforce development investments geared to the governor’s Drive to 55 effort including:

  • $2.5 million for statewide outreach efforts geared toward adult students, technical assistance to local communities that are finding ways to support adult learners, and a one-stop portal for adults;
  • $2.5 million to support the success of the SAILS (Seamless Alignment and Integrated Learning Support) program which address remediation in high school;
  • $1.5 million to provide last dollar scholarships to adults with some post-secondary credit to attend community college;
  • $1 million to establish competitive grants to 2-year and 4-year institutions to develop initiatives specifically designed for veterans; and
  • $400,000 to establish the Tennessee Promise Bridge Program, which will bring first-generation college students to campus prior to fall enrollment, which is one more step in making sure they have the best chance possible to succeed.

Other highlights of the budget include:

  • $48 million for state employee pay raises and compensation tied to performance and ongoing market adjustments; and
  • $36.5 million dollars for the Rainy Day Fund to bring it to $528 million.

The governor’s legislative agenda will be announced Tuesday.

The complete text of the governor’s speech and an archived video of his speech will be available at www.tn.gov/stateofthestate.

***

Complete text of the governor’s speech follows:

Lieutenant Governor Ramsey, Speaker Harwell, Speaker Pro Tem Watson, Speaker Pro Tem Johnson, Members of the 109 th General Assembly, Justices, Constitutional Officers, Commissioners, friends, guests and fellow Tennesseans:

First, let me begin by assuring you that I don’t plan on making you listen to me give an address every week. There was the inauguration a couple of weeks ago, Insure Tennessee last Monday, and then tonight. I’m sure some of you are already tired of hearing me, so this will be the shortest State of the State speech yet.

Last week, the decision was made not to move forward with Insure Tennessee. However, that does not mean the issues around health care go away. Too many Tennesseans are still not getting health coverage they need in the right way, in the right place, at the right time. An emergency room is not the place where so many Tennesseans should be going for health care services. It’s not the best health care for them, and it’s costing us a lot more in the long run.

Health care costs are still eating up too much of our state’s budget and impacting the federal deficit and nation’s debt. According to the Congressional Budget Office, if we maintained health care costs at their current levels, which we know are inflated, for the next eight years – just kept them flat – we’d eliminate the nation’s deficit. To do that, we can’t keep doing what we have been doing.

So, though the special session has ended, I hope we can find a way to work together to address those problems.

As we transition from the special session to the regular session, I look forward to continuing to work together on the important issues that face our state and our citizens.

This evening, I am here to update you on how we’re doing as a state and to present our administration’s budget. You will see in the budget that we are continuing to invest in the things that we believe in and that Tennesseans care about: education, jobs and a customer-focused, efficient and effective state government.

I stand here tonight to tell you that the state of our state is enviable in many ways. There are a lot of good things happening in Tennessee, and they’re being recognized in significant ways across the country.

Nearly 225,000 new private sector jobs have been created in Tennessee in the last four years, and we hold the designation of “State of the Year” in economic development for an unprecedented second year in a row.

We lead the country in academic achievement gains, and we are the first state ever to promise that our high school seniors can attend two years at a community or technical college free of tuition and fees.

We have the lowest debt per capita of any state and among the lowest tax rates.

So, we have a lot of momentum to build on, and as I said several weeks ago at the inaugural, we’re not letting our foot off the gas.

The next four years also come with the reality that we will face the same budget challenges that we have faced in the past four years. Every year we have a limited amount of new money that is available from our revenue growth. That new money rarely keeps pace with our budget obligations and growing costs for education and health care. That’s why it is so important that our state has built a track record of fiscal restraint.

There are a lot of things that state government is responsible for and that we’re accomplishing that you may not know about. I still learn something new from our departments all of the time.

For example:

  • Our Department of Developmental and Intellectual Disabilities’ state service delivery system is the very first to be accredited in the nation.
  • In the Department of Children’s Services, the Child Abuse Hotline took 140,000 calls and 80 percent of those calls were answered within 20 seconds, which exceeds national standards.
  • In 2014, there were fewer accidental fire-related deaths in Tennessee than in any year in recorded history.
  • Last year, Tennessee had the second lowest number of traffic fatalities of the past 50 years.
  • Average wait times in our driver services centers have dropped from over 32 minutes in 2011 to under 24 minutes in 2014.
  • Tennessee State Parks had 35 million visits last year.
  • The Department of Veteran’s Affairs serves about 10 percent of our state, more than half a million veterans and their dependents each year.
  • We are all concerned about prescription drug abuse in our state, and from the work of our Public Safety Subcabinet and legislation you’ve passed, the amount of narcotic pain medication prescribed in Tennessee is down five percent. And, doctor shopping is down 42 percent from its peak in 2011.

All that work starts with a state government that is up to the task. That means a customerfocused government that recruits, retains and rewards the best and brightest employees to serve.

Three years ago, we worked with the General Assembly to overhaul our outdated employment system. Because of that, we are now able to recruit, hire and promote based on who is best for the job, not who has been in line the longest.

Two years ago, we put $60 million in the budget to raise state employee salaries to be more in line with the market place.

This year, we are including $48 million in the budget for employee pay raises and market adjustments. That amounts to a three percent pool, but unlike in years past, those won’t be across the board. Pay raises and compensation will be tied to employee performance in addition to ongoing market adjustments. We have worked hard to bring employee salaries up to be competitive with the private sector. After nearly two years of implementing performance evaluations, it makes sense to take the next step to move toward rewarding employees like the private sector does – on their performance and results, not just on seniority.

As we continue to prepare for a changing workforce, we are doing all we can to give our commissioners the tools and flexibility to meet the needs of their departments.

We are going to be asking a lot from our employees as we move full speed ahead. I am grateful for the dedication of employees all across the state, and I’m excited about the opportunity to better recognize and reward them for their work.

As we talk about state government’s workforce, we are also making certain that Tennesseans are prepared for the workforce challenges of today’s global market economy.

There has been a lot of talk in this country about the income gap – about our shrinking middle class – and it’s no secret that Republicans and Democrats have some different views about the best ways to address that. But there is a truth that we all know and that we can all agree on.

The best answer of all involves creating opportunity for more people to be prepared for the jobs of the future.

If you take a two-earner high school educated couple and they both obtain college degrees, their income rises on average $58,000 per year.

Unfortunately, in our country, the escalator has stopped. In ranking the world’s countries by the percentage of the population with a degree, the United States ranked second in 2000. Today, we are fifth, and most disturbingly, we ranked 12th among the 25 to 34-year-old age group.

More Americans, almost 30 percent, have less education than their parents, than the 20 percent who have more education than their parents.

In Tennessee, we are doing something about that. Two years ago, we announced our Drive to 55 to raise the percentage of Tennesseans with a certificate or degree beyond high school up from 32 percent to 55 percent by the year 2025.

Last year, we introduced the Tennessee Promise – the very first state in the country to guarantee high school graduates two years of free community college or technical school.

This year, of our 65,000 high school seniors, 58,000 of them applied for the Tennessee Promise. Equally notable, 9,200 adult Tennesseans signed up to be volunteer mentors for those students. For the last 30 years, Tennessee’s greatest need has been for better trained workers who can fill the jobs that companies want to bring here. We think the Tennessee Promise is a game changer.

We know that access is important, but even more important is success. Not only do we need to get those students into school, they need to finish. That’s why the mentor piece of the Tennessee Promise is so important.

But we’re also going to include $400,000 in this year’s budget to establish the Tennessee Promise Bridge Program. It’s a pilot program to bring first-generation students to campus prior to fall enrollment. When nobody in your family has ever gone to college before, being there can be intimidating. This is one more step to make sure these students have the best chance possible to succeed.

It is also why our SAILS program is so important. SAILS gives students who need extra support in math that attention during their senior year in high school so they can avoid remediation when they enter college. We piloted the program two years ago, and the results speak for themselves.

Last year, 8,100 students were served by the SAILS program, and almost 70 percent of those students completed all remediation while still in high school. That saved families nearly $6.5 million in tuition.

This year we are including $2.5 million to sustain the success of the SAILS program.

But the reality is that just reaching high school graduates won’t be enough to reach our goal. In Tennessee, there are nearly one million adults with some post-secondary credit but without a degree. We have to figure out ways to reconnect those adults and remove the barriers that are preventing them from earning their certificate or degree, which will lead to a better job and future.

We are including $1.5 million dollars in this year’s budget for a pilot program – modeled after the Tennessee Promise – to provide last dollar scholarships to adults with some post-secondary credit to attend community college.

Also, beginning this fall, any Tennessee adult will be able to attend a Tennessee College of Applied Technology absolutely free.

The budget also includes nearly $2.5 million for statewide outreach efforts geared toward adult students, technical assistance to local communities that are finding ways to support adult learners, and a one stop portal for adults.

One group of adults that has shown a lot of enthusiasm on college campuses is our veterans. From 2008 to 2013, we saw an increase of nearly 200 percent of veterans enrolling in our colleges and universities. Our Veterans Education Task Force has been working to address the unique needs that our service men and women have when they come home and go back to school. Based on their report, the budget includes $1 million to set up competitive grants to 2-year and 4-year schools to develop initiatives specifically designed for veterans to be successful in earning a degree or certificate.

As we drive more students to our community colleges, technical colleges and universities, we are expecting more from our schools than we ever have before.

We are asking them to move full speed ahead too. We want to make sure they’re keeping expenses low and working to control tuition costs. We’re asking them to make sure they’re providing the right instruction and classes that lead to real jobs.

We know that we have a role to play in this process too. We’ve made education, both K-12 and higher ed, top priorities – both from a policy standpoint and through our budgets. This year is no exception.

In response to our schools’ new focus on success and completion, we will be investing $25 million to fully fund the Complete College Act formula.

The budget will also include $10 million to fund more need-based scholarships for students.

We’ve budgeted more than $260 million for higher ed capital. That funds new science facilities at Jackson State Community College and the University of Tennessee. It also includes nearly $25 million for improvements to our colleges of applied technology all across the state, and it includes the funds to complete the long awaited fine arts building at East Tennessee State University.

The reason we continue to make these investments in education is we want Tennesseans to have the education, training and skills necessary to have a good paying, high-quality job.

And we’re having a lot of success in attracting those jobs to Tennessee. Tennessee has become known around the world as a leading automobile manufacturing state. That’s good news because those are good jobs that bring a lot of other good jobs with them through the supplier network.

In the past, while companies might have trusted us to build their automobiles, they typically put their research and development efforts elsewhere. Today that’s changing, and more and more research and development jobs connected to manufacturing are coming to Tennessee. We want to be known as a state where employers can find the job skills that they need no matter what the skill level of the job might be.

If we are going to achieve the goals of the Drive to 55, then Tennesseans must first have a strong foundation through what they learn in elementary, middle and high school.

I truly believe that getting education right is critical to the well-being of our state – today and in the future. We have to keep going full speed ahead. We can’t afford to go backwards.

We’ve come too far to sell ourselves short. It would be an injustice to our students, to our teachers, to Tennessee families, and to ourselves.

There has been a lot of discussion about education, here and in schools and communities across the state. Most of the discussions have been around three things: state standards – what we will expect every student to know at every step along the way in his or her education journey; student assessments – how we will measure what students have learned through the year; and teacher evaluations.

Let’s start with standards. Standards are the foundational skills that students should know at different grade levels. For example, one of the kindergarten reading standards is to “demonstrate understanding of spoken words, syllables, and sounds,” which includes recognizing and producing rhyming words and counting, pronouncing, blending and segmenting syllables in spoken words.

We typically review education standards – like that one – every six years, but because of the ongoing conversation on a state and national level, we thought it was appropriate to take a fresh look at them now, after four years. It is important for us to realize that there are more than 1,100 standards for English language arts and more than 900 for math.

Back in November, we launched a website where Tennesseans can go to review and make comments on our existing state standards. This spring, the Southern Regional Education Board, an independent, third party organization, will collect the input from the website, which will then be reviewed and analyzed by six advisory teams divided up by subject matter and made up of Tennessee educators. Those teams will then make recommendations to two expert committees of educators, which will then propose changes to the State Board of Education.

If you haven’t visited the website, I encourage you to do so. So far, nearly 82,000 comments have been submitted. I expect that we’re going to talk about state standards this session, and I think it is important that we know exactly what the standards are that we’re talking about and possibly voting on.

To me, it doesn’t really matter what we call our standards. What does matter is that we have the highest standards possible. What does matter is that we continue to have high expectations for our students, teachers and this state. We can come up with Tennessee standards that allow our students to compete with anyone in the world.

Over the past four years, I’ve met with thousands of educators to get feedback on what’s going well in our schools and classrooms and what’s not. One thing I hear a lot is frustration about the feeling that their profession is treated like a political football. We have to give our educators more stability and certainty in their classrooms and not change the game on them session after session.

We’ve proposed legislation that specifically addresses many of the concerns I’ve been hearing from teachers including the alignment of what they’re teaching with our year-end assessment and having the Department of Education provide more information about the annual tests so they can better prepare their students every year. We are also proposing to make reasonable changes to teacher evaluations, and we’re focusing on overall improved communication and collaboration with educators.

We are asking more of our teachers and their students than ever before. And guess what? Teachers and students are rising up to the challenge.

By now, almost everyone knows that Tennessee is making impressive gains in academic achievement. I expect there will be a lot of discussion about education this session, and there should be. You’ve heard me say it before, but it bears repeating: There is nothing more important to our state than getting education right. That’s why in this year’s budget, we are proposing nearly $170 million more for K-12 education.

The budget includes nearly $44 million to account for growth in the Basic Education Program. While other states are cutting K-12 education, Tennessee continues to be one of the few states in the country to make significant investments. In fact, our state spending on K-12 education over the past four years increased at a rate more than double the national average.

We know that a big part of success is to have a great teacher leading every classroom. Just like with state employees, we want to recruit, retain and reward the best and brightest educators. A big piece of doing that is paying good teachers well. One of our goals in Tennessee is to not only be the fastest improving state in academic achievement gains but to also be the fastest improving state in teacher compensation. Tonight, I am pleased to announce that the budget includes $100 million for increasing teacher salaries. That amounts to a four percent pool that local education associations will have available as they make decisions on increasing teacher pay.

We are also including $5 million in the budget to create the Educators’ Liability Trust Fund to offer liability insurance to our teachers at no cost.

We will continue doing all we can to work with educators and support them as professionals who are shaping the future of our children and our state.

In this year’s budget, we have $300 million in new revenue to work with and $500 million in cost increases, primarily for education and health care increases. That’s why we have to try different approaches that will help us keep costs down while increasing quality and outcomes in health care.

Obviously, those increases have necessitated $200 million in cost reductions in other places. The cost reductions that we make are painful and involve hard choices but without making those hard choices in the budget, we simply could not keep producing a balanced budget every year. Since we’ve been in office, we have redirected more than $450 million so that we can keep funding our state’s needs while we are balancing our budget.

The reality is that’s not going to change. We are going to have to continue to look for ways to cut costs and reallocate resources. One of the things that we like the best about Tennessee is our low tax structure, but that also means that we have limited revenues to fund the programs and services that Tennessee taxpayers rely on.

That’s why we’ve worked to better manage our real estate and office space that results in real savings. That’s why we’re taking the next step to reduce energy costs and consumption across  our departments through our Empower Tennessee program. That’s why we work to maintain the low debt that we have as a state. By the way, continuing to pay off our debt this year means that we’ll spend $13 million less this year on interest than we did last year.

And, we’re going to make certain that we’re prepared for the future by continuing to strengthen our Rainy Day Fund. This year we will add $36.5 million to bring the total to $528 million.

After presenting our budget last year, there was a sharp decline in revenue collections, and we weren’t able to do some of the things we initially proposed in the budget.

Most of the drop was in our business tax collections. We’ve spent a lot of time working internally and with outside experts to analyze what happened.

Some of it is a result of the natural volatility of business taxes in general. Some of it was due to over collections in which reimbursements weren’t accounted for in the budgeting process. And some of it is that companies outside of Tennessee, but that do business in Tennessee, aren’t always required to pay the same taxes that our in state and homegrown companies do.

Through the analysis, we found that Tennessee has fallen behind other states in protecting our in state businesses from unfair competition from out of state companies.

To remedy that, we will file the Revenue Modernization Act, which aims to level the playing field in terms of sales tax and business taxes.

The bill also capitalizes on trends that we’re seeing in product distribution by creating an incentive for companies to use Tennessee’s distribution industry, which maximizes our state’s strengths.

We are committed to Tennessee remaining a low tax state. This proposal simply brings us in line to better compete with other states and to not put our in state businesses at a disadvantage, which we are doing today.

I understand, for all of us, there is a lot of work, demand and pressure that comes with being an elected official, but there is also something really special about serving our fellow Tennesseans.

As I look back on the past four years, it is pretty incredible all that we have gotten done in working together. In looking back, I also see how fast time goes by. That’s why we’re not letting up on the throttle these next four years. We have to go full speed ahead because there is still a lot of work to do.

After the Insure Tennessee vote last week, there has been a lot of speculation about what happened. Some people have asked me if it was a waste of time and if I regret bringing the proposal. The answer is no to both.

To me the work we do here shouldn’t just be about winning or losing. That’s what’s wrong with Washington. Every issue is cast in terms of political wins and losses. It should be about getting to the right answer, serving the people of Tennessee, and doing our part to make lives better.

Last week, I talked about coming here not just to make a point but to make a difference. It’s about looking for answers not just having an agenda. With great power comes great responsibility.

I was in Washington weekend before last for a series of dinners and events. There were a lot of people who are currently in power and more than a few who used to be in power and have moved off of the stage. Some of those who are no longer on the stage wished mightily that they could be back on it. Others were content to have played their role at their particular time. Regardless, it reminded me that we all have a shelf life. At some point, it will be our turn to move off of this stage and to move on from here. When that time comes, let’s be able to look back knowing that while we had the high privilege of serving here, we did everything we could to make Tennessee an even better place to live, work, and raise a family.

Until that time comes, let’s keep moving full speed ahead.

Nationwide Study Finds TN Among Economic Development Subsidy Top-Spenders

Press release from Tennesseans for Fair Taxation; June 19, 2013:

Washington, DC, June 19, 2013 — In recent years, state and local governments have been awarding giant economic development subsidy packages to corporations more frequently than ever before. The packages frequently reach nine and even ten figures, and the cost per job averages $456,000 and often exceeds $1 million. Tennessee is tied for fifth-most megadeals—with 11—and ranks eighth in total megadeal spending at $2.5 billion.

These are the findings of Megadeals, a report released today by Good Jobs First, a non-profit resource center based in Washington, DC. The report can be found online at www.goodjobsfirst.org/megadeals.

“These subsidy awards are getting out of control,” said Philip Mattera, research director of Good Jobs First and principal author of the report. “Huge packages that used to be reserved for ‘trophy’ projects creating large numbers of jobs are now being given away more routinely.”

Naomi Goodin of Tennesseans for Fair Taxation (TFT) noted, “Tennessee is fifth in the number of megadeals, yet tied for last in measures of personal income growth. This sounds like a ‘reverse Robin Hood’ mentality. We already penalize our middle and lower-income citizens with proportionally higher taxes. Let’s at least make sure their tax dollars will benefit the people.”

“Further,” Goodin adds, “Recent media attention to the privatization of state government functions and preferential bias in the contracting process illustrates why transparency and accountability to taxpayers must be a mandate; not an option.”

In a painstaking review using hundreds of sources, Good Jobs First identifies 240 “megadeals,” or subsidy awards with a total state and local cost of $75 million or more each. The cumulative cost of these deals is more than $64 billion.

The number of such deals and their costs are rising: since 2008, the average frequency of megadeals per year has doubled (compared to the previous decade) and their aggregate annual cost has roughly doubled as well, averaging around $5 billion. For those deals where job projections were available, the average cost per job is $456,000.

Michigan has the most megadeals, with 29, followed by New York with 23; Ohio and Texas with a dozen each; Louisiana and Tennessee with 11 each; and Alabama, Kentucky and New Jersey with 10 each. Forty states plus the District of Columbia have done at least one megadeal.

In dollar terms, New York is spending the most, with megadeals totaling $11.4 billion. Next is Michigan with $7.1 billion, followed by five states in the $3 billion range: Oregon, New Mexico, Washington, Louisiana, and Texas.

“Despite their high costs, some of the deals involve little if any new-job creation,” said Good Jobs First executive director Greg LeRoy. “Some are instances of job blackmail, in which a company threatens to move and gets paid to stay put. Others involve interstate job piracy, in which a company gets subsidies to move existing jobs across a state border, sometimes within the same metropolitan area.”

Megadeals have been awarded to many of the largest and best known companies based in the United States as well as foreign ones doing business here, including: every large domestic automaker and all of the foreign auto producers with appreciable U.S. sales; oil giants such as Exxon Mobil and Royal Dutch Shell; aerospace leaders Boeing and Airbus; banks such as Citigroup and Goldman Sachs; media companies such as Walt Disney and its subsidiary ESPN; retailers such as Sears and Cabela’s; old-line industrials such as General Electric and Dow Chemical; and tech leaders such as Amazon.com, Apple, Intel and Samsung.

The most expensive single listing is a 30-year discounted-electricity deal worth an estimated $5.6 billion given to aluminum producer Alcoa by the New York Power Authority. Taking all of a company’s megadeals into account, Alcoa is at the top with its single $5.6 billion deal, followed by Boeing (four deals worth a total of $4.4 billion), Intel (six deals worth $3.6 billion), General Motors (11 deals worth $2.7 billion), Ford Motor (9 deals worth $2.1 billion), Nike (1 deal worth $2 billion) and Nissan (four deals worth $1.8 billion).

Fifty-six megadeals went to corporations with parents based outside the United States and seven more went to joint ventures of domestic and foreign companies.

The megadeals list is a new enhancement of Good Jobs First’s Subsidy Tracker database, the first online compilation of company-specific data on economic development deals from around the country.

Until now, the content of Subsidy Tracker has consisted exclusively of official disclosure data provided by state and local governments. However, many large deals pre-dated disclosure and many recent ones are missing from the official lists because of gaps in state and local transparency practices. To overcome those constraints, Good Jobs First went back and assembled information on large deals using a wider variety of sources. The resulting list of megadeals has been incorporated into Subsidy Tracker (www.subsidytracker.org).

In a policy sidebar, the study points out that the Governmental Accounting Standards Board (GASB) has been long-negligent in failing to promulgate regulations for how state and local governments should account for tax-based economic development expenditures. If GASB were to finally promulgate such regulations—covering both programs and deals—taxpayers would have standardized, comparable statistics about megadeals and could better weigh their costs and benefits.

Lights, Camera, Spend: Tennesseans Boost Hollywood With Film Incentives

Did you enjoy ABC’s “Nashville” series? Good, because you’ll be paying for it to the tune of $8.5 million.

Millions of public dollars — in tax credits and, as of this year, via grants — have flowed into the state’s film incentive program to aid productions such as Larry the Cable Guy’s Christmas special, “Hannah Montana: The Movie” and promos for “Monday Night Football.”

In all, Tennessee is on track to fork over $22 million worth of handouts for Hollywood productions that are made in the state, a TNReport review of state records from 2008 to 2012 shows.

“This is one of the most insidious forms of corporate welfare out there,” Trey Moore, with the free-market think tank Beacon Center, said. “It’s hard to argue that this is a good deal for taxpayers.”

To put the amount in context: $22 million could pay for an additional 455 Nashville firefighters or five additional teachers in each of Tennessee’s 95 counties this year.

Tennessee film subsidies

Supporters of the state’s film incentive program say it boosts economic development, spurs job creation and is good marketing for Tennessee. The program is overseen by the Tennessee Department of Economic and Community Development.

Officials point to “Nashville,” ABC’s prime-time soap opera in which a 40-something country star must share the stage with a sassy young starlet.

“The program that’s had the most accolades is the recent film series ‘Nashville,’” Economic and Community Development commissioner Bill Hagerty said during a recent budget hearing.

Bill HagertyBill Hagerty

“The pilot was outstanding,” he said in November. “It still ranks number three in the ratings today, and we’re very optimistic that ‘Nashville’ is putting an important brand on the state and one that’s very positive for us.”

Over the past year, film incentives weren’t just teed up for the show “Nashville,” but to productions such as the faith-based drama “Unconditional,” and “Water for Elephants,” the circus-train romance/animal cruelty flick starring Reese Witherspoon.

Supporters of the incentives say that the program’s front-end money translates into economic benefits for the state, with “Nashville” alone bringing in $49.5 million in economic development. But for most of the program’s short history, the formulas for arriving at such numbers have been kept secret, and it’s still not clear exactly how the $49.5 million is estimated.

See all of the projects that have received public incentives from Tennessee here.

State officials say the program will be more transparent going forward. As of July 1, the state began administering all incentives as grants rather than tax credits — called “spurious” by one study.

There appear to be some benefits to this change, including greater transparency. Under former Gov. Phil Bredesen, who launched the incentive program, many of the presumed economic benefits were closed to the public. Benefits to film companies were in the form of tax credits, and a great deal of tax information in Tennessee is not public under state law.

But now, under Gov. Bill Haslam: “It is a more transparent process,” ECD spokesman Clint Brewer told TNReport. “The collapsing of the tax credit had several benefits, and that’s one of them. By and large everything we do in this department is an open record.”

It’s now easier for smaller and independent film productions to tap into the cash, too.

“The result is that we took a complicated, burdensome process that involved tax credits and a lot of paperwork and streamlined it significantly,” Brewer said.

But critics of the program doubt the benefits from the movies move the economic needle in Tennessee.

“This is just another example of corporate welfare,” said Moore, of the Beacon Center. “It’s rampant across the country when it comes to the film and movie industry, and, unfortunately, it’s hard to identify what’s really coming in the door.”

All these film incentives have Hollywood licking its chops: The Los Angeles-based Screen Actors Guild makes a web page available to all its members showing the film tax and grant benefits available in states across the U.S.

What of all those other states that have taxpayer-supported film incentive programs? Won’t jobs leave Tennessee and head there? Alabama, Kentucky, Mississippi and Missouri all have robust film incentive programs. And Louisiana is the granddaddy of film incentives in the U.S. — second only to California and New York — garnering the nickname “Hollywood South.”

“If giving away money is a good way to create jobs when you’re not getting anything in return, I would have a hard time believing that,” Moore said. “It’s a notoriously fickle industry. There’s no guarantee that even once we give them this money that this is going to stick around.”

It’s not just the fiscal conservatives who question grants to film companies.
The left-leaning Center on Budget and Policy Priorities conducted a national study on film subsidies and found that “in the harsh light of reality, film subsidies offer little bang for the buck.”

The study found:

+ Subsidies reward companies for production that they might have done anyway. Some makers of movie and TV shows have close, long-standing relationships with particular states. Had those states not introduced or expanded film subsidies, most such producers would have continued to work in the state anyway. But there is no practical way for a state to limit subsidies only to productions that otherwise would not have happened.

+ The best jobs go to non-residents. The workforce at most sites outside of Los Angeles and New York City lacks the specialized skills producers need to shoot a film. Consequently, producers import scarce, highly paid talent from other states. Jobs for in-state residents tend to be spotty, part-time, and relatively low-paying work — hairdressing, security, carpentry, sanitation, moving, storage, and catering — that is unlikely to build the foundations of strong economic development in the long term.

+ Subsidies don’t pay for themselves. The revenue generated by economic activity induced by film subsidies falls far short of the subsidies’ direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies’ positive economic impact.

And while Tennessee officials boast that film subsidies can lead to good public relations for the state, some states’ programs have backfired in the PR department.

Louisiana recently received a black eye when consultants determined the program wasn’t getting the results officials said it was.

From the Los Angeles Times:

Louisiana, for instance, estimates that for every dollar it paid out in tax incentives for film projects over the last three years, it got back tax revenue of 24 cents. Still, the state’s analysis shows that film jobs in the state rose from about 900 in 2001 to about 5,000 now, so although the Big Easy’s state loses money on every job, it presumably hopes to make it up in volume.

Iowa’s film program was rocked by a scandal when prosecutors charged the state’s former film chief with various felonies, including official misconduct over his handling of state film tax credits.

Michigan was hit with some ironic bad press after reporters found that the state had coughed up more than $831,000 in tax dollars for “Capitalism: A Love Story,” Michael Moore’s movie that, in part, is critical of companies that accept corporate welfare.

Tennessee film subsidies by year

Under Haslam, the state has accelerated spending on film incentives, with more dollars thrown at moviemakers in 2012 than in 2009, 2010 and 2011 combined.

“As part of Governor Haslam’s Jobs4TN economic development plan, the entertainment industry was identified as one of the key industries in which the state has a clear competitive advantage,” Hagerty said in a statement last year after legislation was passed giving the film incentive program a $2 million boost.

At the same time, the brass behind the show “Nashville” is not so subtly indicating that if they don’t get additional incentives, they’ll pack up their Dobros and go home.

“The show’s backers are saying additional incentives — the extension of a heightened state reimbursement and other possibilities — will likely be needed to justify the cost of continued filming in Music City,” the Nashville Business Journal reported. “The fact that the show, which has seen ratings drop since its premiere before regaining some ground (in November), has been picked up means there will be a full season for backers to tout and public officials to weigh.”

Trent Seibert can be reached at trent@tnreport.com, on Twitter at @trentseibert or at 615-669-9501.

Chattanooga Touted as Economic Success Story

Chattanooga, with its low unemployment and increasing property values, is showcased as something of an economic turnaround story in today’s Wall Street Journal.

The city’s riverfront development, Internet connections that can reach speeds 200 times the U.S. average, and the attraction of employers Amazon and Volkswagen are touted as evidence the city has undergone a rebirth in the last 50 years.

The writer revisits the loss of manufacturing jobs in the ‘60s and brings the story forward through renewal and development in the subsequent three decades: “By the mid-1990s, the downtown boasted new museums, a theater and an aquarium. Next, city leaders turned to wooing businesses.”

That taxpayers and their pocketbooks continue to play a major role in the city’s growth is not lost in the praise, with criticism of “corporate welfare” on the one hand, a belief that such grants are indispensable on the other.

For now, the proponents are winning. All Tennesseans are chipping in. The state program called FastTrack used to entice Amazon and Volkswagen’s operations to Tennessee is poised to expand.

 

Haslam Bills Meet Resistance

Last week was trying for Gov. Bill Haslam after a number of his high-profile bills faced turmoil and criticism from both Democrats and the GOP faithful in the Legislature.

Haslam has dozens of legislative initiatives he’d like the General Assembly to pass this year, ranging from lowering the tax on food to overhauling how state workers are hired and fired.

Here is a breakdown of the status of some of his proposed bills:

Classroom Sizes Bill A Bust (SB2210/HB2348): Haslam spent weeks trying to sell the public on increasing pay for teachers in challenging schools and difficult subjects by letting districts adjust average class sizes. No dice. The governor dropped that plan after hearing teachers and lawmakers argue stacking more students in the classroom is a bad idea.

Ownership Trips Up Economic Development Bill (SB2207/HB2345): The administration wants to collect certain financial information on businesses wanting tax breaks but says companies will only comply if the state keeps that info secret. There’s been some resistance from the Legislature, where leaders say info on the winning companies should be public. Edits are in the works. The bill faces floor votes in each chamber as early as Thursday.

State Employees Steps Away from TEAM Act (SB2246/HB2384): Haslam wants to do away with “bumping,” which lets laid-off state workers take jobs of lower seniority workers, creating a domino effect. The state employees union says Haslam’s plan could lead to political hiring and firing and stopped negotiating with the administration. The bill is now in State and Local Government committees to be heard Tuesday.

Inheritance Awaiting a Price Tag (SB3762/HB3760): For all the Republicans’ enthusiasm for reducing the tax on inheritances, Haslam’s plan to up the $1 million exemption to $1.25 million hasn’t budged. The office that estimates the fiscal impact of legislation has yet to calculate the price tag for this bill, which is why it hasn’t moved.

Slice the Food Tax Also On Hold (SB3763/HB3761): Lawmakers across the political spectrum are hungry to reduce the food tax, although some want it cut differently. Haslam’s proposal would drop the 5.5 percent tax to 5.3 percent. Lawmakers have placed this bill on the back burner, parking it in finance subcommittees while awaiting an estimate of its fiscal impact.

Boards and Commissions Begin To Move: (SB2247/HB2385SB2248/HB2386SB2249/HB2387): The governor wants to eliminate redundancies by restructuring 22 state boards and commissions, including a panel that oversees Haslam family-owned gas stations. The Senate unanimously OK’d one bill shifting some duties from the Board of Probation and Parole to the Board of Correction Thursday, but two other bills have yet to be heard in committee.

ECD Secrecy Bill Reconsidered

A Haslam administration-backed bill that would prevent government from disclosing the names of company owners or key corporate officials seeking state taxpayer-funded business incentives has stalled in the Tennessee Legislature.

Senate Bill 2207 is meant to allow the state to mine and scrutinize the financial details of businesses applying for tax-subsidized grants. It also contains confidentiality provisions meant to assure companies their proprietary information won’t end up making headlines.

But both Lt. Gov. Ron Ramsey and House Speaker Beth Harwell told reporters this week they favor rewriting the measure with the intent of addressing transparency concerns many lawmakers and open-government advocates have voiced.

“Private companies just do not want all that information divulged, and that’s understandable,” said Harwell, R-Nashville. “On the other hand, citizens have a right to know how their tax dollars are being used and spent, and I think we’re going to come up with what will be pleasing to both of those.”

The issue of primary contention is whether to reveal company ownership. The measure, pitched by Gov. Bill Haslam, now calls for businesses to submit information like budgets, cash flow reports and a list of owners to the Department of Economic and Community Development. The department says such information would help vet companies wanting state dollars for investing in Tennessee.

The state doesn’t ask for those details now because they would be made public, putting the Volunteer State at a competitive disadvantage with states that obtain such information and keep it closed to the public, administration officials say.

“I think there are some folks like that who are like, ‘We’ll, we’re trying to decide are we going to invest in Tennessee or Indiana or Florida or Texas or wherever,’ and they might be a smaller, privately owned company,” Haslam said in defending the bill Wednesday. “As long as they don’t intersect in anybody in the public sphere, I’m not certain why we need to know that.”

Ramsey and other critics say they’re OK that most financial details be private, but that ownership should be made public eventually.

“Should these people, any business or company, get a grant, get FastTrack money or whatever it might be, the information is divulged at that time. That’s the intent,” Ramsey told reporters Thursday.

The measure is up in the Senate Thursday. Since the state currently doesn’t collect that information, the state is “no worse off” if the bill doesn’t pass, he added.

Haslam, Parton Pair Up

Dolly Parton is planning to build the nation’s first snow and water park in Nashville, and taxpayers are going to help foot the bill — an unknown amount about which officials hemmed and hawed at a Thursday announcement.

Gov. Bill Haslam is promising Parton new road turnoffs and infrastructure grants for the country music star’s new amusement park planned to open summer 2014 in Nashville. Haslam said he didn’t know how much the state’s total incentive package for the new park would cost taxpayers.

Nashville Mayor Karl Dean also signaled city support for marketing and infrastructure but, similarly, did not elaborate.

The amusement park, a product of Gaylord Entertainment Co. and Parton’s Dollywood Company, is so far unnamed, but officials said they believe the $50 million project will attract some half million visitors in its first 12 months of operation at a site near the Gaylord Opryland hotel off Briley Parkway. Parton and Gaylord CEO Collin Reed say it would create 450 jobs.

“If you think about it, the state lives off of sales tax,” Haslam told reporters after palling around onstage with Parton at the Grand Ole Opry. “And there’s no question this is something that’s going to draw people from outside the state, so I do think it’ll mean new dollars for Tennessee.”

Haslam said the development would build on the state’s tourism industry, one of the largest moneymakers in the state.

In addition to road work, the project will qualify for state FastTrack Infrastructure Development grants, Haslam said. Those are the same kind of grants that the state used to reel in companies like Volkswagen in Chattanooga.

Haslam said he wasn’t sure whether the project would qualify for an expansion of that program he has pitched this year. Haslam’s plan — SB 2206 — would specify that “funds be used in exceptional circumstances when the funds will make a proportionally significant economic impact on the affected community.”

Norris Tweets Dig at Dems on Solyndra Setback

Everything under the sun seems to be open to squabbles over jobs between Republicans and Democrats in the Tennessee Legislature. Now it’s solar panels.

Senate Majority Leader Mark Norris tweeted Tuesday night, “Solyndra’s shadow as Dems plan to tour Bredesen’s solar farm.” Norris linked to a recent Nashville Business Journal article noting that solar businesses either seem to be starting up or fading away.

Solyndra, based in Fremont, Calif., specializes in rooftop solar power systems. The company received a loan of $535 million in 2009 as part of the federal stimulus package and has been lauded by the Obama administration as an example of the nation’s energy future.

But the company has shut down, laid off hundreds of workers and filed for Chapter 11 bankruptcy protection. The company also faces a federal investigation. The House Energy and Commerce oversight committee is scheduled to begin hearings on Solyndra on Wednesday, but Solyndra executives have postponed their appearance, citing the bankruptcy proceedings. A column posted Tuesday night on Politico called the Solyndra venture “corporate favoritism” and “Chicago-style deal-making.”

Norris picked up on the Solyndra news as a further dig at Democrats, who plan to make the West Tennessee Solar Farm with Haywood County Mayor Franklin Smith part of their jobs tour Sept. 19-24.

The Solar Farm is on the first day of the Democrats’ tour, right after a tour of the vacant West Tennessee megasite. The solar farm, near Interstate 40, is part of the Volunteer State Solar Initiative of former Gov. Phil Bredesen.

Norris responded to the Democrats’ jobs tour announcement early this month by calling it the “Obama Apology Tour.”

But in February, Republican Gov. Bill Haslam expressed his pleasure that the U.S. Department of Energy had cleared the path for the solar farm, citing Tennessee’s commitment to a clean energy future.

“It’s a tangible demonstration that jobs and investment in this fast-growing sector of our economy are welcome in Tennessee,” Haslam said in a formal statement at the time.

In the same announcement, Economic and Community Development Commissioner Bill Hagerty said, “We’ve seen billions of dollars in capital investment in the solar industry alone in Tennessee. Coupled with the investments we’re seeing in energy efficiency, sustainable transportation and other forms of clean energy, the clean energy sector has the potential to truly become a bright spot for Tennessee in terms of job growth.”

Haslam and U.S. Sen. Lamar Alexander recently visited another Bredesen-linked project, the ethanol-from-switchgrass process in Vonore, Tenn., after which both the governor and the senator expressed support for the business but limited interest in subsidies for it.

Southerland Holding Out Hope for NE TN Megasite

State Sen. Steve Southerland sounds enthusiastic about the possibility of Upper East Tennessee landing a TVA megasite like the ones taxpayers provided for Volkswagen and Hemlock Semiconductor.

But the Morristown Republican’s enthusiasm may be more a matter of a legislator cheerleading than an indication of any substantive action. Other officials, including some community leaders in the region itself, say they see no hint of a megasite headed to the area, for a variety of reasons.

State Economic and Community Development Commissioner Bill Hagerty said recently he had heard the subject come up in regard to Upper East Tennessee, but he downplayed the potential.

“In terms of a new large-scale megasite like West Tennessee, I think there is a lot of optimism we might be able to do that in other parts of the state, but there is nothing along that magnitude on the drawing board right now,” Hagerty said.

Alan Palmieri, mayor of Jefferson County, said he has heard the subject raised for his region — but only “for years and years and years.” Mayor Bill Brittain of Hamblen County, which includes Morristown, said this week he has not heard the matter come up.

But in talking to a reporter at a recent event in Morristown, Southerland made it sound like efforts are underway for landing a megasite.

“We’ve got sites in the area that could be a megasite,” Southerland said. “It has a good possibility, because our counties are working together. We know it has to be a joint, regional project.

“We approved three megasites. We’ve got one in West Tennessee, Middle Tennessee and then one in Chattanooga. But we have not received one for Upper East Tennessee. It’s our turn. We spent the money down there. If the people are willing to work together up here and we have somebody wanting to come this way we’re going to go for it.”

Megasites have been noteworthy for several reasons recently. Tennesseans have begun to see the fruits of preparing large tracts of land and infrastructure, with Volkswagen opening its manufacturing plant in Chattanooga and Hemlock making an impact in Montgomery County, including ties with Austin Peay State University.

A third megasite, in Haywood County in West Tennessee, has begun to get more attention from government officials, but it remains vacant.

Gov. Bill Haslam has taken some of the glimmer off the headline-grabbing practice of attracting large businesses to the state, pointing out that most of the job growth comes from existing businesses, not high-profile relocations.

Nevertheless, Haslam has repeatedly said that doesn’t mean the state has abandoned the big relocation approach. At an economic development meeting in Morristown, Haslam said the administration is still ready “to move heaven and earth” to get such investments.

Southerland picked up on that line.

“Just like he said, we’d move heaven and earth to get another Volkswagen here,” Southerland said. “When you look at Hamblen County, we’re like a hub for other counties bringing in automotive jobs.”

Taxpayer bill can reach hundreds of millions of dollars

State and local taxpayers typically can end up contributing hundreds of millions of dollars to the development of a megasite.

In the case of the Enterprise South industrial site that attracted Volkswagen to Hamilton County, the government’s bill, including tax breaks, was estimated in one report at $500 million. Volkswagen made an investment of $1 billion, roughly the amount Hemlock put into the megasite in Montgomery County.

Arrangements for the sites can involve help from federal, state and local governments. After that, the value of the investment is widely open to debate. Economic development officials routinely have said the kinds of businesses attracted by the megasites are giant winners for the locations. But increasingly, questions exist as to the return on the investment in attracting jobs, as states have become highly competitive.

Haslam has expressed surprise at what some companies want in return for creating jobs in Tennessee, although he has said his administration remains interested in attracting the types of investments made by Volkswagen and Hemlock.

“In this state, the funding for the megasites has been a combination of local government money and state government money, with some participation from TVA funding the certification process,” said Clint Brewer, spokesman for the Department of Economic and Community Development.

In Montgomery and Hamilton counties local governments handled the purchase of the land. For the Haywood County megasite, where local governments lack such resources, the state has purchased most of the land. Theoretically, private entities could have to assemble the property at a megasite.

“The local communities pay for the site’s due diligence and improvement, such as environmental reviews, infrastructure improvements, etc.,” said Mike Bradley, of the TVA news bureau in Knoxville, by e-mail Thursday. “This sometimes is done even after the site has been certified as a megasite. The effort is usually championed by a local economic developer.”

The Tennessee General Assembly this year passed legislation (SB1239) to allow the East Tennessee Regional Agribusiness Marketing Authority, or ETRAMA, to issue bonds.

The idea of economic development in the region is to enhance development along the I-81 corridor.

Two issues face the region on infrastructure for business development: hooking up a sewer system to accommodate large capacity and getting connectors in place for major rail lines in the region. Plans for the sewer line would involve trunk lines that would feed wastewater into a plant in Lowland, which is in Hamblen County.

The vacant megasite in Haywood County has 1,720 acres. Another vacant TVA megasite in Hopkinsville, Ky., has 2,100 acres. Those kinds of numbers may work against mountainous Upper East Tennessee.

“I was told years ago because of our geography it’s hard to collect 500 flat acres,” said Rep. Tony Shipley, R-Kingsport. “Maybe we don’t get a megasite. Maybe we get a mega-area.

“The same amount of money is being spent in Chattanooga, West Tennessee and the Nashville basin area. Maybe that same amount of money could come here, because we are distinctly different.”

Palmieri, the Jefferson County mayor, makes a similar observation.

“You look at the land, and you say, ‘Where are you going to locate this?’ Terrain would be part of the process because whatever you do, you’ve got to make it economically feasible. If you’re going to have to go in and take down mountains and blast and everything else, it’s going to add to the cost, which everybody wants to avoid.”

In another way, however, geography is a plus for the region. State and local government officials point to the fact the region is within driving distance of a large portion of the nation’s population.

Like Disney World theme park, talk of megasite ‘just conversation’

Palmieri has heard talk of a megasite but sees little in the way of real progress.

“I know various mayors have talked about it for many years. Various chambers (of commerce) have talked about it. Nothing has really developed outside the fact it’s just conversation,” he said.

“Where would you go? Who’s going to bring in something that massive today? It’s probably been put on the back burner, but it’s been going on for I guess probably the last 10-12 years.”

Southerland sees other factors.

“We know with the earthquake in Japan and the value of the U.S. dollar that Japan will be looking more at investing in the United States in automotive plants. And we’re hoping to get one of whatever comes this way,” Southerland said. “You’ve got to be prepared because when they come they’re going to be looking for somebody that’s already ready to go.”

Palmieri said that for years there was talk that the people from Disney World were going to put a theme park in Cocke County.

“I heard that for 20 years,” he said. “That was a hot one there for awhile. It was going to be just a regular theme park, like a Disneyland or Dollywood. That was before Dolly owned Dollywood.”

But if the region were to get a large plant, Palmieri says the automotive or airline industries would make good sense. He said the area’s workforce, which has experience in production lines, would be good for a manufacturing base.

When asked why the airline industry would be a good fit, Palmieri said, “Everything they have is predominantly in a high-tax area. What they’re having to pay the workforce there is probably three or four times what they could have to pay a workforce here in Jefferson County or East Tennessee.

“Transportation-wise, with the Interstate and everything else, easy access in and out, I can see where they could save a lot of money, and it’d be much more profitable for their company.”

Aircraft maker Boeing has recently been involved in a dispute with the National Labor Relations Board over a plant it plans to build in South Carolina. Palmieri said Tennessee should get a look.

“If Boeing ever took a serious look, they could come in, acquire property and build buildings and have a workforce ready to go, and they would save money almost right off the bat,” he said. “South Carolina is more expensive. They have payroll taxes and everything else. I don’t understand that.

“I have family there. It’s a beautiful state. I can’t stand Steve Spurrier (the South Carolina football coach). But why would you go to South Carolina when Interstate access, transportation needs, centralization, taxes, everything is so much better right here in East Tennessee? I don’t understand that.”

Haslam Unveils ‘INCITE’

Gov. Bill Haslam on Thursday announced a $50 million investment in state and federal funds into strategies he believes will increase the number of jobs in Tennessee.

The program, called INCITE, represents the most recent element of Haslam’s JOBS4TN plan announced last month.

INCITE is an acronym that stands for innovation, commercialization, investment, technology and entrepreneurship. The plan is part of the overall focus on what Haslam has said is his top priority as governor: job creation.

The bulk of the $50 million — $30 million — will be put into capital “co-investment funds,” which the administration says will complement the state’s existing TNInvestco venture capital fund and Pathway Lending program, and is expected to be in operation by this fall. The total also includes $10 million for the Memphis Research Consortium, a public-private group for idea-sharing that Haslam announced his intention to fund in his original budget presentation in March.

Haslam presented his major jobs initiative on April 20 along with Commissioner of Economic and Community Development Bill Hagerty. Haslam promised at the time there would be more to come on innovation, and that announcement came Thursday in a speech to the Tennessee NEXT Conference, held by the Tennessee Technology Development Corporation at the War Memorial Auditorium in Nashville.

“We have an environment with many of opportunities to improve,” the governor told the audience. “We cannot expect to create high quality jobs, and to move our state’s economy forward relative to other state if we don’t do a better job of capturing innovation created here in Tennessee and moving it into the marketplace.”

Haslam characterized the investment as “early stage and seed capital to help grow innovation businesses in Tennessee.”

“While we have a great economy in Tennessee, unfortunately we lag behind in some key things like patents per citizen created in Tennessee, like the number of engineers and science professionals in Tennessee,” Haslam told reporters after the speech.

“This is all focused on taking our innovative capacity, growing that and then finding ways to bring that to market and grow jobs.”

Haslam said the state needs to do a better job of leveraging some of its current assets in research and development and sees the investments as a way to grow innovative new companies in the state.

Hagerty said Thursday the process for how companies will be designated to benefit from the funding is still under way.

“We’re working with the Treasury Department right now to refine the program,” Hagerty said. “That will determine what qualified investment partners will look like and qualified companies will look like, so the criteria are still under development.”

Part of the idea for INCITE will be to move products “from the research lab to the marketplace” faster, according to an official announcement by the administration.

The plan will include funding a business incubator — which provides assistance in various ways for start-up businesses — in each of the nine economic development regions Haslam has outlined in his overall jobs plan. The regional approach is geared toward capitalizing on the best assets in those specific regions.

In his speech Thursday, Haslam told the audience the state has the potential to make up ground where it lags economically. But he said research institutions in the state are not as closely aligned with the private sector as they need to be. He said less than 3 percent of the research and development in the state is funded by the private sector, which he said is about half the national average.

“We can do better when it comes to commercialization of our own ideas,” he said.

Among the research institutions Haslam has referred to are the Oak Ridge National Laboratories, Vanderbilt University and the St. Jude’s Children’s Research Hospital in Memphis.

Haslam’s overall jobs plan has been to focus on building upon assets already in the state, as opposed to emphasizing recruitment of outside jobs. The administration has said the vast majority of job growth in Tennessee is in its existing businesses. The effort to focus on the potential in research institutions already in the state follows that same path.

TNInvestco was formed in 2009 under then-Gov. Phil Bredesen. It markets tax credits to venture capital funds with the idea of channeling funding into innovative businesses. Pathway Lending has assisted in loan programs for the state for small businesses and for companies to finance investments in energy-efficient technology.

The Memphis Research Consortium includes the University of Memphis, the UT Health Science Center, St. Jude’s, Memphis BioWorks and FedEx. The concept is to pool and build on strengths in research at those various institutions.