Georgia has more constitutional restrictions on public aid to private companies, and therefore on non-tax economic development incentives than most surrounding states, according to a new report.
In “Assessing Georgia’s Non-Tax Economic Development Incentives: A Comparison of Georgia to the Neighboring States,” Carlianne Patrick looks at the state’s non-tax incentives (such as grants and loans) and compares them with four other states — Alabama, North Carolina, South Carolina, and Tennessee — normally in competition with Georgia. (See Table 2.)
In Georgia, restrictions require that non-tax incentives for private companies use a public or quasi-public entity as a conduit. However, governments cannot offer gifts or credit for the benefit of private firms. With variations, Patrick notes that neighboring states do offer such incentives.
Proponents of incentives say steep competition means Georgia’s restrictions should be relaxed. On the other hand, opponents argue that constitutional limitations prevent unnecessary public risk and debt.
“These constraints allow policymakers to credibly argue that they cannot provide certain types of incentives and focus incentive policies on public infrastructure and workforce investments instead,” Patrick states.
However, Patrick’s research indicates that such limitations do not appear to harm employment growth or the perception of the state as a good place to do business. For example, in 2013 and 2014 Georgia was ranked No. 1 in business climate by Site Selection magazine.
“That being said,” Patrick asserts, “Georgia policymakers cannot match all types of economic development incentives available in neighboring states without state constitutional changes.
“The question is do they need to?”