The Democrats celebrated their takeover of the Colorado House by assigning House Bill 1001, their leadoff measure, to some “economic development” incentives that only a few companies could profit from.
It was considered important enough that Gov. John Hickenlooper and Speaker Mark Ferrandino, D-Denver, promoted it at a pre-session news conference last week.
The so-called “Advanced Industries Acceleration Program” would allow the state’s Office of Economic Development and International Trade to bestow not loans or tax credits but grants to favored startups in seven fields: advanced manufacturing, aerospace, bioscience, electronics, energy and natural resources, infrastructure engineering and information technology.
Ferrandino said he hopes to find $15 million a year for the program. An undetermined amount will come from the existing bioscience discovery and clean-technology discovery programs, which would be repealed; from changes to the enterprise zone program and, of course, from the general fund.
Grants of up to $150,000 will be made to companies who have a proven concept; those farther along in the production process could get grants of up to $500,000. Applicants have to show their plans will produce new jobs or keep existing ones going, bring in capital to the state or have other economic impacts.
In other words, you need to know how to spin the blue-sky stuff.
Those applying for the smaller grants would have to have $1 for every $2 sought from the state. Those seeking the larger grants would need to have $2 for every $1 in state money sought.
Although it’s clearly a Democratic initiative, the sponsors emphasized they have Republican support, namely Rep. Cheri Gerou of Evergreen.
Playing favorites is in fact a bipartisan vice. Last year, for instance, Rep. Tom Massey, R-Poncha Springs, finally succeeded, after eight years of trying, to get a bill passed that grants special tax breaks for movie producers.
Both parties were involved as well in getting the Regional Tourism Act passed in 2009. It authorizes the Economic Development Commission to grant state tax incentives to projects that might attract more tourists to the state. Various communities apply, but few are chosen. There are several losers for every winner.
State Rep. Spencer Swalm, R-Centennial, doesn’t much like the new “industries acceleration” measure.
“I tend to be skeptical of these bills,” he said. “Our funds are still tight, and I don’t think we’re any better at picking winners and losers than the typical stockbroker is.”
He described it as “corporate welfare,” similar to the enterprise zones that were established many years ago in “economically challenged” areas. Now they cover most of the state.
“The Democrats said it was corporate welfare, and it’s true,” said Swalm.
But he may be in a minority. New Minority Leader Mark Waller, R-Colorado Springs, said he tends to support HB-1001. On the other hand, he noted, “the Democrats have come up with other ways to spend budget increases,” namely increased Medicaid funding. “We may go over our own little fiscal cliff.”
The $15 million sought for the program is small potatoes compared, say, to the $535 million loan guarantee that Solyndra obtained from the federal government in 2009. Its chapter 11 bankruptcy filing and closure two years later resulted in a 70 percent loss to federal taxpayers.
But the principle is similar. Governments large and small who think they can pick winners with other people’s money end up losing it more often than not.
If there’s $15 million extra lying around, why not give a tax break to all state businesses, or citizens, or spend it on a legitimate government function?
Start-ups with a real chance of success don’t need special treatment from government. They can get bank loans or private equity money. And if they succeed, they expect to pay back the loans or pay dividends on the stock. That’s how they measure success.
Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at firstname.lastname@example.org You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake andwww.CompleteColorado.com
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