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Special Session Begins for Boeing Incentives

The Missouri General Assembly will begin its work today on a tax incentive package aimed at luring aerospace giant Boeing to move its production of a new airplane to the company’s St. Louis plant. Governor Jay Nixon issued the call for a special session last Friday following several meetings with Boeing officials. 

You can read the official call here.

Over the last several months, Boeing has come to a stalemate with the state of Washington over an incentive package and is actively seeking proposals from other states, including Missouri. It is unknown how many states Missouri is competing against but reports have said that Boeing has contacted 12-15 states and asked for proposals.

Details of the incentive package are still surfacing and nothing will be known until bills are filed later in the week. So far it appears the proposal will be to increase a set of tax credit programs that are contingent on job creation by a total of $150 million per year. The information coming out of the Governors office and the General Assembly have not included discussion of a sunset on the incentive package so at this point it is unknown how long the credits would last.

As with any tax credit program, we must be cautious of how it could affect general revenues and the money available for education. Governor Nixon has publicly stated that he is still committed to fully funding the formula by the end of his term as Governor and that this proposal will not inhibit him from meeting that goal over his final three years in office. Without assurances that Missouri will see a return on its investment, Missouri’s budget is likely to get even farther from the goal of full funding of the state’s foundation formula or restoring many of the cuts to categoricals that have been realized over the last several years.

Supporters of public education should ask for a few provisions to be highlighted in whatever package is considered during this special session.

1. Legislators could use this as an opportunity to reform Missouri’s bloated tax credit system. Particularly the low-income and historic preservation programs that are some of the largest programs in the country despite returning ten to twenty cents on the dollar.

2. A sunset should be placed on the proposal so that the program can be reviewed in a few years to ensure that Missouri is getting a return on its investment.

3. Protections should be included in this deal so that if Boeing chooses not to come to Missouri, tax payers are not left on the hook for hundreds of millions of dollars and steps must be taken to ensure that taxpayer dollars can be recouped if jobs and economic development are not created with these incentives. (Currently, the Governor is proposing expanding a group of successful tax credit programs that have these protections already in place.) 

These requests are consistent with the School Administrators Coaliton’s position on all tax credit programs. 

Some skeptics are viewing Boeing’s move to seek RFP’s from other states as a way for the company to improve their negotiating position with the state of Washington and its local machinist union in Seattle. The union recently rejected a plan that would have lowered pension payments for the company and significantly cut pension benefits. The state of Washington has already approved $8.7 billion in incentives to keep the company and their governor has publicly stated that he is committed to doing what it takes to keep Boeing in the Seattle area.

As pointed out in The Missouri Wonk, a nonpartisan group that studies economic development and tax policies, one aerospace industry executive puts Missouri’s chances of luring the aerospace giant to Missouri at 1%. Three locations in Long Beach, Salt Lake City, and Huntsville, AL are the company’s top manufacturing sites outside of Washington and would likely be at the top of Boeing list if it were to move production.

Significant resistance is expected from several conservative members of the Senate that are passionate about reforming Missouri’s tax credit programs and are expected to oppose this deal unless it contains significant tax credit reforms. Also, several legislators have voiced serious dismay over the short period of time that the General Assembly has to evaluate the proposal.

Boeing will ultimately make its final decision at the beginning of 2014 and have asked states to have their proposals to the company by mid-December. It is not expected that this special session will last more than a couple of weeks.

Please check out the News section of our site for press coverage of the Boeing deal.

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