(TOPEKA, Kan., AP) — Missouri Gov. Jay Nixon generated skepticism in two state capitols by calling publicly for a moratorium on the use of incentives by his state and Kansas to lure businesses across the state line in the Kansas City area.
Both states have reasons to pursue the idea. For now, Missouri appears to be losing the economic contest, but Kansas Gov. Sam Brownback acknowledged last week that he’s worried about companies “gaming” the two states by moving back and forth across the border every few years. Last year, records showed that the two states had committed more than $750 million in incentives and bonds over the previous five years to entice businesses to locate or expand in the area.
But in Missouri, some Republicans in the GOP-controlled Legislature saw Nixon’s proposal last week as an effort to gain more control over economic development programs and criticized the Democratic governor for vetoing tax cuts this year. In Kansas, some members of the GOP-dominated Legislature see no reason to drop a winning strategy, and Brownback suggested the first step proposed by Nixon would require far more from Kansas than Missouri.
“This has got to be a negotiation,” Brownback told reporters last week. “This has got to be them putting chips on the table and us putting chips on the table.”
Nixon proposed the moratorium last week in a speech to the Greater Kansas City Chamber of Commerce, but the idea isn’t new. Last year, a bipartisan group of Missouri legislators from the area pursued the idea, and Brownback said the two states have talked about the idea for more than a year.
In his remarks, Nixon said the states’ incentives often “manipulate the market” by subsidizing the movement of jobs just across the state line, without creating new jobs for the region.
“That’s bad for taxpayers. It’s bad for our state budgets,” Nixon said. “And it’s terrible for our economy — hampering our ability to compete as a region globally.”
Nixon said the first step should be an immediate moratorium within the Kansas City metro area on the use of discretionary incentives where jobs are merely being moved across the state line. The next step, he said, is for he and Brownback to work with their respective legislatures to get a law passed making that moratorium permanent.
But officials in both states noted that Nixon has far less discretion over Missouri’s incentives than Brownback has over Kansas’ incentives.
“What I’ve been saying to them is, ‘You need to get discretionary authority, and we’ll then negotiate what we can do,'” Brownback said.
The idea is anathema to some Republican legislators in Missouri, and House Speaker Tim Jones, a Eureka Republican, said in a statement that Nixon was trying to capture more authority so that he could “micromanage tax credit programs.”
“The answer is not to stop what we’re working on and hand Governor Nixon the keys,” Jones said.
Also, Republicans argue that Missouri is at a disadvantage because of Nixon’s veto of income tax cuts, which would have helped both businesses and individuals. Nixon argued that the cuts would have depleted state funding for education and other important programs.
GOP lawmakers in Missouri pursued the cuts after Kansas enacted massive income tax cuts last year at Brownback’s urging. Not only did Kansas cut individual income tax rates, it exempted the owners of 191,000 businesses from paying personal income taxes on their profits.
“I’m willing to listen to anything that makes sense for taxpayers,” said Missouri state Sen. Eric Schmitt, a Glendale Republican who is chairman of the chamber’s economic development committee. “But the elephant in the room here is Kansas has already done something that I think is significant on the border.”
Meanwhile, in Kansas, some legislators took Nixon’s proposal as a declaration of surrender, making them less likely to embrace a moratorium.
Part of the evidence that Kansas has been winning the economic battle is the massive Village West development in Kansas City, Kan., with its new stadium for professional soccer’s Sporting Kansas City and a new headquarters for medical computer systems developer Cerner Corp.
A U.S. Bureau of Labor Statistics report last month showed the Kansas side of the metropolitan area outperforming the Missouri side in job growth most of the three years ending with August.
The Kansas side had 9,900 more people holding private-sector, nonfarm jobs in August than in August 2012, or growth of 2.5 percent. On the Missouri side, the growth was 1,900 jobs, or 0.4 percent.
Kansas state Rep. J.R. Claeys, a Salina Republican who serves on the House tax and commerce committees, said that even if the two states can agree on a moratorium, Kansas’ tax changes are going to continue to lure businesses.
“It just happens that Missouri is low-hanging fruit,” he said.
All of which means that the Democrat Nixon is now fighting Republicans on both sides of the state line.