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It’s crunch time in Georgia’s General Assembly, with only three working days left in the legislative session. To see where particular bills and resolutions stand, check out The Atlanta Journal-Constitution’s Legislative Navigator at http://legislativenavigator.myajc.com/.
In other legislative news
Gov. Nathan Deal has warned that he could call a special session if the General Assembly doesn’t produce an adequate transportation funding bill by Thursday. B1
After “religious liberty” bill is amended in committee, its sponsor tables the measure. B2.
In other legislative news
Gov. Nathan Deal has warned that he could call a special session if the General Assembly doesn’t produce an adequate transportation funding bill by Thursday. B1
After “religious liberty” bill is amended in committee, its sponsor tables the measure. B2.
In other legislative news
Gov. Nathan Deal has warned that he could call a special session if the General Assembly doesn’t produce an adequate transportation funding bill by Thursday. B1
After “religious liberty” bill is amended in committee, its sponsor tables the measure. B2.
Every year the General Assembly passes big tax breaks with the promise of creating jobs, and this session lawmakers are turning back the clock a bit for an investment plan that would cost the state treasury about $110 million.
The House has approved and the Senate will vote Friday on legislation creating a “Georgia New Markets” program that would allow insurance companies and others to get tax credits in exchange for investing in low-income communities and small businesses.
Backers say the program will provide much-needed capital to small businesses in low-income areas of the state, including rural Georgia.
Critics say some New Markets projects across the country have become hybrids of the old CAPCO programs, which promised jobs but wound up making huge profits for a few large, out-of-state capital firms, or CAPCOS, that handled the money. The Government Accounting Office last year said better controls and data were needed to ensure New Markets was effective, and at least one top Republican senator said the federal program lined the pockets of big banks and private investors.
House Bill 439 appeared to be sailing through the General Assembly with little opposition, but then Senate leaders got involved. They amended it to cut Invest Georgia in on the deal. Invest Georgia, a 2-year-old venture capital fund that is a pet project of Lt. Gov. Casey Cagle's, would get half of the state tax credits to dole out, ensuring long-term financing for the program.
“Whether Georgia needs this bill is questionable,” said Wesley Tharpe, a tax policy expert with the Georgia Budget and Policy Institute.
That is not how lawmakers see it. The General Assembly annually approves about $100 million or more in tax breaks to specific businesses, industries or individuals with the promise that the money will retain or create jobs. An Atlanta Journal-Constitution review in 2013 found that many beneficiaries of tax breaks failed to deliver.
In 2011, with Georgia in the grips of the after-effects of the Great Recession, the General Assembly came within a last-day vote of approving a bill that would have funneled $125 million through out-of-state CAPCOs to small businesses.
Some national experts called the program, which has been tried in several states, a scam that benefited the investment companies. The AJC reported that similar programs were curtailed or shut down in some states. Supporters said investments from CAPCO programs created and saved jobs.
Some of the same investment companies are back supporting the New Markets bill, a program active in several states. They’ve hired some of the top lobbying firms at the Capitol to push their case.
One of the companies, Advantage Capital Partners, contributed about $36,000 to state candidates and parties over the past few years. It gave $3,500 to the re-election campaigns of Cagle, Gov. Nathan Deal and Senate President Pro Tem David Shafer, R-Duluth. The company contributed $20,000 to the state Republican Party just before the 2014 elections, and among its lobbyists is Pete Robinson, a Deal fundraiser.
A Georgia Budget and Policy Institute analysis called HB 439 a hybrid of CAPCO and the federal New Markets Tax Credit.
Under HB 439 as passed by the chamber earlier this month, deferred insurance premium tax credits would be be doled out over several years to companies for investing in low-income areas using banks or companies such as Advantage Capital.
According to Advantage, the investor gets the tax credit, while the companies earn interest on the loans and returns on investments in the small business.
"This has been extremely successful in bringing capital to these businesses," said Rep. Jason Shaw, R-Lakeland, the bill's author.
Shaw said surrounding states have seen strong returns on their investments in terms of helping businesses grow. “This is about creating jobs where they are needed,” Shaw said.
Jeffrey Dorfman, a professor of applied economics at the University of Georgia, produced an analysis before the session saying New Markets programs are “successful at both the federal and state level at increasing investment in targeted areas.” His analysis also said the programs “have essentially a 100 percent probability” of generating more tax revenue for the state from the investments than the government pays out in tax credits.
But the Budget and Policy Institute said the complex financing process would makes it hard for the state to monitor and evaluate whether it actually works. One Arkansas official reported having trouble tracking the money, and a bill in that state was filed to kill the New Markets program.
“It’s very difficult for lawmakers and regulators to understand the steps along the way,” said Tharpe, from the Georgia Budget and Policy Institute.
Recently retired U.S. Sen. Tom Coburn of Oklahoma was a major critic of the federal program, calling it a “reverse Robin Hood” that takes federal tax money and gives it to banks and deep-pocketed investors who don’t need government assistance. At the time, Coburn said killing the program would save taxpayers $1 billion a year.
Before HB 439 could get through the Senate Insurance Committee this week, Invest Georgia backers stepped in.
Invest Georgia was launched in 2013 with hopes that ponying up state dollars could attract enough venture capital to help transform Georgia into a tech hub. Lawmakers didn't allocate money for the program the first year. But it got an initial $10 million when Deal shifted money from the higher education system to the program.
Senate Insurance Chairman Charlie Bethel, R-Dalton, said Invest Georgia is a top priority for Cagle, who wants the venture fund to pump $100 million into young businesses.
So under the Senate version of the bill up for a vote Friday, half of the about $110 million in tax credits would be used by Invest Georgia to attract investment, and half would go to the New Markets program.
Knox Massey, executive director of Invest Georgia, said supporters have been looking for ways to get money into the program. He said Invest Georgia is hoping to start investing in businesses soon.
While he’s not sure either program is needed, Tharpe said Invest Georgia is a better place for the funds, in part because it has to regularly report where the money is invested. “The New Markets portion is still troubling based on the experience of other states,” he said.
The left-leaning policy institute said the state would get a better return on the money by putting it into public education or rural hospitals to provide health care. It said New Markets in particular carries high costs but little accountability.
None of that is particularly new to state government, said Alan Essig, a former state budget analyst who runs the institute. He said the CAPCO model, which dates more than a decade in Georgia, is typical of a lot of the tax break programs approved in recent years.
“It’s a lobbyist-driven proposal that is coming from interested parties who are going to make money off of it,” he said. “We approve a bunch of them ever year. We never go back and look back and see if they have done anything. Do the marginal tax breaks really make a difference in creating jobs, or does it just go into increasing their profits?
“There has got to be a better way to make public policy than these lobbyist-driven proposals.”
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