Not yet a year into his term, Gov. Nathan Deal already has faced several issues that will still resonate whenever he leaves office. Reforming the HOPE scholarship in light of revenue realities and signing the controversial HB 87 illegal immigration bill are two from last year. Pursuing the deepening of the Savannah port, the building of new reservoirs in North Georgia, and the revamping of the state’s criminal justice system are three still in progress.
That’s a lot to bite off in 360 days. But with the state still lagging even the lackluster national economy, there might be nothing more important in Deal’s first term than the proposals he’s due to unveil next week to boost Georgia’s competitiveness. For better, or for worse.
The Deal team is keeping its plans under wraps so far. Should there be any last-minute internal debate, let me suggest: Go big, but most of all, go broad.
Georgia’s economic problems are not merely cyclical. It’s no secret that our state, and particularly metro Atlanta, has been overreliant on the real estate development that accompanied our population boom: new housing, new retail and office spaces, and all the things that go with them. The challenge now is to replace that growth engine.
It won’t be done simply or even mostly with big subsidies to lure companies here from the Rust Belt and beyond. Taxpayers can’t fund enough of this kind of job creation for us to get ahead that way. And eventually our existing businesses, peeved from watching — and paying for, with their taxes — all this flirting, will get wandering eyes of their own.
I know other states are doing it, and that many of them are our neighbors. (Many of them, it must also be said, are poorer and more desperate than we are.)
But we should focus on preserving or enhancing those broad conditions that make the business climate favorable for companies wherever they are currently located. Keep the burden of government light, for example, and make it more rational by reforming the tax code — all of it — to make it broader, simpler and flatter. The model is the proposal made last year by the special council on tax reform.
In any event, corporate welfare is not a sustainable strategy.
Nor is it sustainable to keep watching our homegrown startups migrate elsewhere in search of the capital they need to grow. We should do what it takes to develop our own sources of angel and venture capital. But here again, we ought not venture into Solyndra-like bets that pick winners and losers.
I hear encouraging indications that the worst idea on this front — the CAPCO model in which the state essentially hands out money for insurance companies to invest without any claim to the principal or profits — has fallen out of favor. That’s as it should be, and legislators and the governor alike should be on guard against any attempts to tuck the idea into a seemingly innocuous bill in the session’s final moments.
As I’ve written before, however, there are other ways to pursue this good goal the wrong way. The best way is to put a small portion of funds that are going to be invested anyway — say, 1 percent of the state pension fund’s portfolio — into a top-shelf VC or private equity fund, with the stipulation that the fund open an office in Georgia. Let the fund’s managers choose its investments, whether they’re here or elsewhere, but give our companies a better chance at attracting the attention of those managers.
Going about it by having state officials try to select the investments or put parameters on them, on the other hand, is a much riskier proposition.
You may have noticed a common theme here: The point should be not to decide exactly how Georgia should move forward, but to make it easier for Georgians to move ourselves forward. “Bold” does not mean “hands-on.”
All of this ought to come naturally for lawmakers who fancy themselves the conservative leaders of one of the nation’s most conservative states. We’ll find out within the week.
– By Kyle Wingfield