A Border War Truce
We’ve long thought that the competition between states for economic development, largely in the form of incentives, can be counterproductive.
We’ve seen little evidence that tax abatements have been the most important factor – if a factor at all – when companies decide where to move or remain. And yet, the so-called “war between the states,” has continued largely unabated.
What’s more, anecdotally, we’ve heard of a number of instances in which a company has already decided on the state to which it will move, but then fishes around with others, creating a kind of bidding war that doesn’t change the outcome, but does mean that the winning state gets less out of the deal than it might have without this kind of competition.
Now, however, Missouri and Kansas have taken steps to create a ceasefire. After discussions between the two states, on June 11, 2019, Missouri Governor Mike Parson signed legislation restricting the use of economic development incentives for companies on the border of neighboring Kansas.
The Governor was quoted in a press release as saying, “Incentivizing companies to move a few miles doesn’t result in new jobs for the citizens of Kansas or Missouri, and it takes state resources away from other priorities.” As the governor was quoted as saying in Missourinet, “I think Missouri has spent well over $100 million on this border war and Kansas has spent well over $100 million.” The Missouri bill, as you might expect, was contingent on passage of a reciprocal agreement from Kansas. Following an executive order signed by Kansas Governor Laura Kelly in early August (see above photo), the law will go into effect on August 28, 2019.
As the executive order read, “no state-level economic development incentive programs under my jurisdiction shall be used to incent businesses with jobs currently located in the Missouri Counties of Jackson, Platte, Clay or Cass to relocate those existing jobs to the Kansas Counties of Johnson, Wyandotte, or Miami.
Although this pair of bills were initiated by the well-known issues behind the “border wars” between the two states—and is limited to border counties — it certainly feels like a model for other states in similar circumstances; and a model.