Posted: Apr 12, 2010 11:07 AM by Melissa Canone
Updated: Apr 12, 2010 11:07 AM
NEW ORLEANS (AP) - Gov. Bobby Jindal's state incentive-fueled
plan to create jobs in Louisiana could be on a collision course
with a state budget totally awash in red ink.
The administration's drive to bring new business to the state -
and, naturally, increasing the number of jobholding taxpayers - has
resulted in several major projects that are providing immediate
employment boosts and the future of more.
Of course, this has cost money and Louisiana has had little
choice, if it wants to compete with the rest of country for major
business projects, to shell it out in what often amounts to a
bidding war between taxpayers' money from different states.
The alternative, especially with a tax system generally rated
not-so-friendly to business, was shown during the 1990s when
Louisiana was caught standing around as other southern states
nabbed big projects, especially in the automotive industry.
Jindal has not been hesitant to join the fray, committing $363
million from a "megafund," to nab such projects as a ConAgra
sweet potato processing plant that opens in Delhi in November, the
state-aided purchase of a chicken-processing plant in Farmerville,
a specialty chemicals plant in Plaquemine and the federal city in
In 2009 alone, according to a state report, Louisiana committed
more than $357 million toward new business investment. The report
said Louisiana secured expansion commitments from 23 companies and
10 new business projects, retaining 7,900 jobs and eventually
creating up to 8,100 new positions. Two programs aimed at small
businesses generated 2,250 new jobs and 220 new businesses, the
But on the other side of the coin now is a budget short in state
revenue by about $1 billion in the upcoming fiscal year, and
schisms already are developing about what to do to fix it.
The megafund, suddenly, has to line up with everything else in
the budget. Louisiana Economic Development head Stephen Moret says
the state has the money in place to be in contention now for about
10 large projects. But he warns there won't be much money left to
jump into additional frays for the next year or two.
Not only is no one talking about putting more money in the fund,
some legislators have suggested that what unobligated money is left
- about $55 million - may be expropriated for other budget uses.
Two big projects, in the meantime, are stalled or waiting.
The startup automaker V-Vehicle Co. is counting on $56 million
in incentives - still obligated but now on hold - to build its
fuel-efficient auto in Monroe, creating as many as 1,400 jobs. The
federal Energy Department turned down the company's first bid for
$321 million in loans - and wants the company to come up with about
$100 million more in private investment and private credit lines.
Then, the state is still waiting for an up-or-down decision from
steelmaker Nucor Corp. on a proposed pig iron plant in southeastern
Louisiana, a $2.1 billion project that would initially employ 500
people at an annual average salary of $75,000. The Great Recession
put the chill on that project, though Nucor has purchased $50
million for land in St. James Parish and says it prefers Louisiana
over another possible site in Brazil. Nucor also has said it
expects a much-smaller first-quarter loss than it sustained a year
Although no one will say what incentives are being offered to
Nucor, Jindal proposed $65 million in the next state construction
budget for the company - another budget the money-hungry
Legislature will have to vote on. Moret did say the $65 million
won't cover the entire tab if Nucor comes to the state.
So, maybe the current stated economic development strategy -
more emphasis on expanding and keeping existing Louisiana
businesses - is a wise one for Jindal & Co. to pursue. Recently, in
a reversal of the status quo from the 1990s, when oil and banking
consolidation cost Louisiana thousands of jobs, Folgers coffee
decided to consolidate three manufacturing plants to New Orleans.
But an argument is developing: What's more important with tight
money? Future long-term employment prospects or the immediate
spending needs of a state with chronic budget problems and a large,
poor population dependent upon government money?
The eventual answer will make someone unhappy.