Lawmakers Debate if Mo. Business Climate Suits Boeing
JEFFERSON CITY - Gov. Jay Nixon has often clashed with the Republican-dominated General Assembly, but in an early December special legislative session, all sides came together to pass a tax incentive package for Boeing.
Missouri is one of 15 states vying to attract new Boeing investment. Boeing is currently the second largest employer in the St. Louis area, employing more than 15,000 people.
Boeing is currently looking for a place to build its new 777x commercial aircraft. Customers have already placed 259 orders for the jets, valued at $95 billion.
Sen. Eric Schmitt, R-St. Louis County, called the proposed Boeing plant a "transformational opportunity" and carried the tax incentive plan through the Missouri Senate for the Nixon administration.
Lawmakers passed a plan to give Boeing as much as $1.7 billion in tax incentives. The incentives are tied to job creation.
If the company creates 8,000 jobs, it would get $1.7 billion in tax incentives during a 23 year period. It would get $435 million in the next 23 years if it creates 2,000 jobs.
The St. Louis County Council has also signed off on a nearly $1.7 billion incentive package.
Nixon signed the state's plan into law and the two governments combined the proposals to send them to Boeing before the Dec. 10 deadline.
House Speaker Tim Jones, R-Eureka, often disagrees with Nixon on many issues. However, Jones said he and Nixon were "on the same page" during the five day special session.
Although lawmakers billed the special session as a bi-partisan gathering, it sparked debate about Missouri's business climate and whether the state government is doing enough to foster economic growth.
Several lawmakers expressed concern with Missouri's labor unions. Others used the special session as an opportunity to talk about tax policy and how the state uses tax incentives.
RIGHT TO WORK
Boeing is looking for a new place to build the 777x because it could not come to an agreement with labor unions in the Seattle area. Lawmakers in Washington also met for a special session and offered Boeing nearly $8.7 billion in incentives.
In Washington, 67 percent of the union machinists voted against an eight-year contract extension that would have cut benefits while keeping 777X work in Everett. Everett is home to the company's production line for the 777, the earlier version of the twin-engine model. The union voted against the plan Nov. 14.
Boeing was asking workers to change the pension plan from a defined benefit plan to a defined contribution plan.
Boeing also has a long history in the Seattle area. The company was founded there and was headquartered there until it moved its headquarters to Chicago in 2001.
The St. Louis Building and Construction Trades Council, the Eastern Missouri Laborers' District Council and the Carpenters District Council of Greater St. Louis promised Nixon's administration a 24-hour work day to build the 777x facility in Missouri. The unions said it could build the facility a year faster than projected, saying a facility like Boeing's would normally be built in six, ten-hour shifts.
The machinists union in St. Louis also said it is ready to come to an agreement with the company if it decides to come here.
Rep. Eric Burlison, R-Springfield has long been a proponent of so-called "right-to-work" legislation. Right to work laws prohibit requirements that base employment on the condition that workers join and support a union.
Missouri is not a right-to-work state and Burlison said it could hurt the Show-Me-State as it tries to be Boeing's suitor.
"As we look for ways to promote economic development and job growth we need to realize our state is discouraging a large number of employers from locating here because of our union shop status," Burlison wrote in a news release. "We need to remove the obstacles that prevent Missouri from reaching its potential as an ideal location for businesses that offer good-paying, family-supporting jobs."
Burlison is sponsoring a bill for the regular session to make Missouri a right-to-work state.
Although the Washington union originally voted against a contract with Boeing, leaders presented a new plan to keep 777x work in the Seattle area.
International Association of Machinists (IAM) District 751 President Tom Wroblewski told the Seattle Times the talks were "respectful and constructive."
However, the Seattle Times reported the talks broke down Thursday night. The International Association of Machinists rejected what the company called its "best and final" proposal.
Although many lawmakers approved of the Boeing incentives, some said Missouri has missed opportunities to give tax breaks to everyone instead of just one company.
Gov. Jay Nixon vetoed House Bill 253, a business and personal income tax cut bill in May. In September, lawmakers failed to override his veto of the legislation.
Ray McCarty, President and CEO of the Associated Industries of Missouri told KOMU 8 News he would have preferred a tax cut for all businesses, but said he approves of the Boeing investment because it will create opportunities for many companies.
"Even though Boeing is located in the St. Louis area, we have a lot of suppliers all over this state, many of them in small towns that make pieces for machinery that is now being manufactured by Boeing," McCarty said. "It is our hope that if Boeing brings all that work into the state of Missouri it will increase business for those suppliers."
McCarty said Boeing has many so-called "tier-2" and "tier-3" suppliers, smaller manufacturers that make smaller machine parts.
The company said it has more than 600 suppliers and vendors in Missouri and purchases $837 million worth of parts and materials from Missouri companies every year. Boeing said it supports 30,000 direct and indirect jobs in the state.
HANDING OUT TAX BREAKS
The Missouri Department of Economic Development uses 61 tax credit programs to give incentives for everything from low-income housing development to amateur sporting events.
Lawmakers often debate the effectiveness of the credits, as defined by the return on investment. The General Assembly has also made several attempts in recent years to reign in what the state doles out in tax incentives.
In 2012, the state redeemed nearly $650 million worth of tax credits, which is roughly equivalent to one-twelfth of the state's $8 billion in general revenue collections that year.
On the first day of the special session lawmakers seemed open to the idea of tax incentives for Boeing, but wanted to see more specifics.
On day three of the session the Nixon administration projected a significant return on investment for taxpayers. Nixon's staffers told lawmakers every dollar in tax breaks would lead to a two dollar increase in general revenue collections.
Some lawmakers wanted to use the special session to limit the amount of tax breaks currently handed out. Several Republican senators threatened to abruptly halt the talks saying the state could only justify a large Boeing tax package if it could cut down on the use of other credits.
In closed-door caucus meetings, Nixon's administration came to an agreement with those lawmakers, saying he would be more engaged in talks to reign in tax credits during the regular session.
In a Columbia meeting in early December, the state's housing and development commission voted 6 to 1 to hold up nearly $14 million worth of authorizations of low-income housing tax credits. This was seen as the first step in Nixon's engagement on tax credit reform. Lt. Gov. Peter Kinder, who is a member of the commission, said Gov. Jay Nixon's chief of staff requested the delay.
Lawmakers have often complained Nixon is closed off and not very engaged in the legislative process, but lawmakers of both parties said Nixon was involved all throughout the session.
Although Republican senators did not filibuster the Boeing plan, they still voted no after floor debate. The bill passed the Senate 23-8.
Sen. Kurt Schaefer, R-Columbia, voted no and told KOMU 8 News the proposal would require a significant commitment from the state.
"Every time you look at giving all of your economic incentives to just one part of the state, you certainly have a concern for what it means for the rest of the state that doesn't benefit either directly from that or actually loses the opportunity for economic development opportunities down the road," Schaefer said.
If Boeing decides to move to Missouri it would get tax credits through four state programs: Missouri Works, Missouri Works Training, BUILD and a state TIF (Tax Increment Financing).
Boeing expects to make a decision sometime early in 2014.