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As I See It

What’s the bigger issue behind the beef plant? Buying jobs

Pick up a newspaper or tune in to a local TV newscast and you’re going to find plenty of coverage of the failed beef processing plant in Yalobusha County. The Mississippi media has covered the basic facts, as well as the accusations, fingerpointing and crawfishing by the key players of this economic development project gone wrong, in great detail.

This attention has been good because what happened with the Mississippi Beef Processors facility in Oakland is a big deal.

It remains to be seen what the taxpayers’ tab for this mess will be, but rest assured that the political consequences will be significant. While I’m willing to believe that many involved in putting this project together had the best of intentions, those intentions have cost the State of Mississippi — funded by you and me — millions. Tens of millions of dollars.

We have a right to know what went wrong, and I’m confident that our capable state auditor, Phil Bryant, will get to the bottom of it all.

The specifics of the Mississippi Beef Processors deal are important. It’s clear that some important checks and balances were bypassed. These loopholes need to be closed. The people’s business should be conducted in the open and should be subjected to appropriate controls to insure accountability.

Considering the underlying issue

Having said all of that, the bigger issue, to me anyway, is the appropriateness of the state buying jobs. I know this goes to the very heart of modern economic development and many will question my sanity for even raising the issue.
However, I remain unconvinced that buying jobs with taxpayer dollars is a sound economic development strategy.

Fact is, we’re using tax dollars to subsidize the operations of new businesses. While we’re all giddy about the prospect of a new industry coming to our area at taxpayer expense, what are we doing for the existing businesses that have been good corporate citizens for years and years and generate about 80% of all new jobs? In a few words, very little. One must be the new girl in school to get the attention.

What could we do for existing businesses to support their success and expansion if we weren’t giving the gold to the new guys? Plenty.

We could lower taxes for one thing and thereby make the state more attractive for new business to come here without us having to pay a subsidy. We could also expand the Mississippi Development Authority’s staff to provide even more assistance with import and export opportunities, business counseling and expanding markets within the U.S.

Finally, and probably most important, we could vastly expand workforce training for our existing workforce to get them better prepared for new jobs in the Knowledge Economy.

What does it cost?

The cost of buying jobs seems to be in the range of $75,000 to $125,000 each. That’s a chunk of change! And, that doesn’t include local tax incentives and special deals on utility rates. What if we invested that money on advance skill training for our existing workforce? Wouldn’t companies be knocking our doors down to get access to our world-class workforce?

Do you ever wonder where the money comes from to pay for the jobs we buy? It gets shifted to a part of the state’s budget that few even discuss. We issue bonds to pay the tab and repayment of the bonds is part of our fixed debt service. All of the whooping and hollering is about the general fund shortfall with little attention paid to our growing debt service obligation. And, ironically, the special funds, including debt service, are much larger than the general fund. But, the Legislature has discretion over the general fund and that’s the one where everybody lobbies for a fatter slice of the pie.

Of course, I realize that it’s unlikely we’ll ever end the underwriting of new jobs from new businesses at taxpayer expense. It’s how the game is played, and as our neighbors do it, we must do it, too — just to stay on the field.

It appears that buying new jobs in Mississippi has a bright future. Nonetheless, I hope that the beef plant fiasco, along with the Magnolia Venture Capital Fund debacle of a few years ago, will teach us that government has no business in business. Government should take the very least taxes possible from the citizens and provide the minimal required services as efficiently as possible and leave entrepreneurship to the entrepreneurs.

If I were to threaten to relocate the Mississippi Business Journal across the river to Tallulah, La., do you suppose that the state would give me $100,000 each for our 20 employees as incentive to stay? Two million bucks would go a long way toward funding my retirement. We’d make more money selling our jobs back to the state than we’ll ever make publishing a newspaper.

Think about it: What’s your business worth? It’s a question that more economic developers and the Legislature ought to keep in mind before the next Big Deal comes calling.

Thought for the Moment — No one can be good for long if goodness is not in demand. — dramatist Bertolt Brecht (1898-1956)

Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at cpajones@msbusiness.com.

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