Brinkmanship with jobs

By H. Edward Flentje.

Most Wichita-area residents breathed a sigh of relief last December when former Governor Mark Parkinson, along with city and county officials, inked a $45 million deal for aviation manufacturer Hawker Beechcraft to maintain 4,000 jobs in Wichita.

The deal was cut after months of community drama in which company officials threatened to uproot the 75-year-old Wichita company and move it, lock, stock, and barrel, to Louisiana. The company had also demanded that union contracts be set aside and vowed to send pieces of the company to Mexico. These threats came after Hawker Beechcraft had cut its Kansas workforce by one-third over the prior two years in response to the economic downturn.

Welcome to the new world of economic development — playing brinkmanship with jobs. This tactic is led by a new breed of hired guns, mostly outsiders and consultants who have little or no attachment to the targeted community. On behalf of corporate clients, they specialize in playing states and communities off against each other — threatening state and local officials with plant closures or moves to another state. In the process taxpayers, employees, and anyone else available are squeezed for all they are worth.

The work of economic development used to be simpler: applying a limited set of incentives to attract new businesses and new jobs or encourage existing businesses to add jobs. In my short stint as Wichita’s interim city manager in 2008 I had no difficulty recommending to the city council and state officials a substantial package of incentives for Cessna to build a complete new airplane in Wichita and create 1,000 new jobs. The joint initiative of the State of Kansas, Hutchinson, Reno County, and South Hutchinson to land global giant Siemens in Hutchinson with 400 new jobs in a completely new industry of wind energy applied this approach.

But the Hawker Beechcraft deal is different, focused on saving existing jobs, not creating new jobs, and the result diverts millions in limited taxpayer funds, primarily state income tax revenues, from state coffers to a company’s benefit, simply to have an existing business stay put.

State lawmakers first opened the door for applying income tax revenues to “job retention” in 2000 under a program called IMPACT (an acronym for “investment in major projects and comprehensive training” act), set a high threshold for eligibility, and placed strict limitations on the use of funds.

Since then, lawmakers have repeatedly loosened requirements and given more encouragement to this game of brinkmanship. Originally, the law required an eligible company to make a capital investment of at least $250 million and maintain 1,000 jobs in the state. Today, no capital investment is required, and the job bar has been slashed to 250 jobs in metropolitan areas and 100 in nonmetropolitan areas.

The Kansas Secretary of Commerce has to sign off on these deals, and to date has approved only nine according to Commerce officials. The winners are large corporate organizations with familiar names—Learjet, Sprint, Applebee’s Services, Boeing, Goodyear, and Black & Veatch, in addition to Hawker Beechcraft—all located in one of three Kansas counties, Johnson, Sedgwick, and Shawnee.

But word gets around in the world of economic development, and demands will escalate. The barn door has been flung open as well over 500 Kansas businesses are now eligible for state assistance, a tenfold increase over the year 2000, thanks to lawmakers. The expanding game of brinkmanship with jobs leaves state and local officials more vulnerable and can be expected to divert millions more in state tax revenues from state government’s primary obligations in response to the demands of companies that choose to play.

Flentje is a professor at Wichita State University and co-author of the new book on Kansas politics Kansas Politics and Government: The Clash of Political Cultures.


2 thoughts on “Brinkmanship with jobs”

  1. What’s wrong with this? It is all about competition. All taxes are theft, so I have been told. So it makes sense that companies would only stay where they have the lowest tax burden. Individuals are free to move to a state that has a lower tax burden. Why can a company not do the same?

  2. Dr. Flentje was a very capable interim-city manager and that is why he did not last long. If you don’t agree with the administration and City Council you are out.

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