Audit of Texas Subsidies Reveals Lax Oversight, Enters Gubernatorial Debate

October 8, 2014
By Good Jobs First

A new audit of the controversial Texas Enterprise FundĀ is casting deep doubts on economic development practicesĀ in Texas and has become a key issue the current gubernatorial race.

Over the course of Governor Rick Perry’s term in office, over a half-billion dollars in subsidies have been awarded to over 100 companies. New revelations from the recent audit raise questions as to whether recipients were adequately vetted and monitored.

Among the major findings:

  • Nearly half of the money awarded, some $223 million, went to 11 recipients that failed to file an application or make specific job creation promises.
  • Texas Attorney General Greg Abbott, a candidate for Governor, denied public access to application records on TEF subsidy recipients. Oddly, the audit revealed that someĀ applications which the Attorney General’s office claimed were exempt from freedom of information laws never actually existed.
  • Because of theĀ failure to adequately document the process of awarding subsidies, the Auditor concluded that, “It was not always possible to determine how the [Governorā€™s] Office made awarding decisions.”
  • The Auditor specifically criticized the practice ofĀ ā€œself-reported information that recipients submittedā€ to determine compliance.
  • A January 2013 report to the legislatureĀ gave a misleadingĀ impression about subsidiesĀ by reporting promised job creation from TEF recipients. The actual rate of job creation, 73 percent, was omitted. Such oversights led the Auditor to conclude thatĀ “The Office also did not consistently provide decision makers with complete and accurate information.” Worse, the report ignored requirements to inform the legislature about the median wages of subsidized jobs andĀ the number of jobs providing health care benefits to employees.
  • TEF subsidy agreements frequently failed to adequately define full-time job creation, despite requiring it from subsidy recipients. And some subsidy recipients weren’t required to meet job-creation benchmarks before receiving grants.
  • The Governor’s Office fell short on recapturing some $3.8 million in subsidies from 23 recipientsĀ whose contracts were terminated and could have collected some $14.5 million through clawbacks from firms failing to meet job creation goals.
  • State law requires that both the Texas Speaker of the House and the Lieutenant Governor be notified about changes in subsidy contracts. But the audit reveals lapses in notifying these parties about changes in subsidy contracts.