This week, the Study Commission on Renewing Incentives met at the Alabama State House to assess Alabama’s economic development competitiveness.
The group was established by the Alabama Legislature in the 2022 session and is responsible for reviewing existing economic incentives and making recommendations ahead of the 2023 session.
One of the specific programs the commission is tasked with analyzing is the Alabama Jobs Act, a performance-based tax incentive that provides income credits for qualified businesses based on new job and investment creation.
In a statement to Yellowhammer News, Alabama Department of Commerce secretary Greg Canfield provided a summary of the program since its inception in 2015. Based on the data, the Alabama Jobs Act incentives are projected to create a 173% return on taxpayer investment within 20 years.
“The Alabama Jobs Act was designed to enhance accountability and ensure that the state is receiving a financial benefit from projects receiving incentives,” stated Canfield. “Between July 2015, when it went into effect, and the end of 2021, projects supported by the Jobs Act have generated commitments for over $17 billion in new capital investment and 34,000-plus jobs.”
“Moreover, these are good jobs for Alabamians,” advised the secretary. “Commerce calculates that the average hourly wage of jobs in projects receiving incentives under the Jobs Act between 2015 and 2021 is $23.69. That is 36% higher than the Alabama average median hourly wage of $17.43.”
In today’s business world, nearly all U.S. cities and states are offering financial incentives to attract companies to locate or relocate.
Alabama is consistently listed as a “Top State” for doing business by Area Development, an industry leading publication. The list is created by an expert panel of consultants tasked with aiding businesses with location decisions. Alabama was ranked No. 6 overall in 2021 and No. 3 in the nation for its business incentive programs.
The Alabama Jobs Act was expanded by the Alabama Legislature during the 2021 session. After bipartisan passage, the goal of the bill was to create economic opportunities in every corner of the state.
“Whether you’re north, east, south or west, whether you’re rural or urban, we think this bill can start a big spark across the state of Alabama,” stated Senate Minority Leader Bobby Singleton (D-Greensboro) upon the bill’s passage.
According to Canfield, the enhancements to the program have provided flexibility for the state to pursue high-growth businesses, including underrepresented companies and locations.
“The 2021 update to the Alabama Jobs Act gives Commerce’s economic development team and its allies across the state new flexibility to pursue growth projects involving companies in the technology industry and those led by women and minorities,” detailed Canfield. “By providing enhanced incentives for these kinds of projects, the state Legislature gave us an additional tool we can use in our strategic efforts to grow Alabama’s economy.”
“I would characterize our recruitment performance for 2021, which was a pandemic-impacted year, as impressive,” he continued. “We had our second highest ever capital investment total at $7.7 billion. And the jobs numbers exceeded 10,100.”
When it comes to addressing Alabama’s plans for growth in rural areas, the incentives have also proven effective.
“Because the Alabama Jobs Act can provide enhanced incentives to growth projects locating in Alabama’s 40 “targeted” counties, it has been a pillar in our strategic efforts to spur new investment and job growth in rural areas,” outlined Canfield. “Since 2015, 56 projects generating $4.3 billion in capital investment and over 6,000 jobs for rural areas have been supported by the Jobs Act. In 2021, there were three projects in targeted counties receiving Jobs Act support, and they will bring $148 million in new investment and 162 jobs.”
According to American economist Timothy Bartik of Michigan’s W. E. Upjohn Institute for Employment Research, over the past 25 years, state and local business tax incentives aimed at promoting economic development have “tripled in size.” However, Bartik warns that incentive programs can have a negative impact on governments if program funding favors larger job creation projects or lead to cuts in public spending.
Performance-based programs like those included in the Alabama Jobs Act are designed to protect taxpayer investments by incentivizing business after jobs creation and investment thresholds have been met.
“The Alabama Jobs Act was designed to enhance accountability and ensure that the state is receiving a financial benefit from projects receiving incentives,” noted Canfield. “Between July 2015, when it went into effect, and the end of 2021, projects supported by the Jobs Act have generated commitments for over $17 billion in new capital investment and 34,000-plus jobs.”
The report from the Study Commission on Renewing Incentives is due by January 31, 2023, in advance of the next legislative session. According to commission chair Lt. Gov. Will Ainsworth, the findings of the commission will have a critical role in the Alabama’s ability to remain ecumenically competitive.
“The commission has done high-quality, thorough work in examining our state’s current incentives programs and how we can reauthorize and amend those programs to give the maximum benefit to our small businesses and our state’s economy,” Ainsworth said. “We have compared what we offer here in Alabama to that of our neighboring states, and in order for Alabama to remain economically competitive, the findings of this commission will be critical in laying out the roadmap on how we can position our state to most effectively leverage incentives programs to spur economic development and grow Alabama’s economy.”
Dylan Smith is the editor of Yellowhammer News. You can follow him on Twitter @DylanSmithAL