Fallin gets “quick action closing” mechanism, but no new funding

 When she signed House Bill 1953 last week, Oklahoma Governor Mary Fallin put into state law the “Quick Action Closing Fund,” a priority economic development (ED) mechanism she had sought since her State of the State speech in January. It is also a program the State Chamber had wanted to add as another tool for attracting new or relocated jobs to the Sooner State.

Fallin had persistently pressed legislators to create the fund so she can leverage deals to attract new or expanded business investment.

The fund has no new cash in it. The governor welcomed passage of the measure, nonetheless.

House Appropriations and Budget Chairman Earl Sears, a Bartlesville Republican told CapitolBeatOK in an interview Tuesday (May 31) that the device is in place as result of the new law, but, barring unforeseen circumstances, there won’t be any new money in the fund before next year.

State officials are counting on economic growth to develop a significant resource for the governor in discussions with business leaders.

The state Department of Commerce will administer the fund. Formerly known as the “Opportunity Fund,” the bill evolved considerably in the course of legislative deliberation.

The final bill featured a “claw back” provision to require repayment to the state if a qualified business does not, in fact, fulfill agreements made under the legislation. Language in the bill requires analysis of “net economic benefit” to the state before agency approval. Projects are subject to gubernatorial approval, after consultation with the President Pro Tem and Speaker of the House.

Part of the measure’s evolution included addition of a provision pressed by state Sen. John Sparks, a Norman Democrat, to prevent conflicts of interest and links between campaign contributions and use of the fund. Sparks gained acceptance of language to mandate that firms benefitting from the fund not be involved with independent expenditures for political purposes before and after awards.

Sparks told The Norman Transcript, “Though the Closing Fund will be an effective economic development tool, I believed it was important we guarantee transparency in the process. The public is rightly suspicious of programs which enable large sums of their money to change hands without transparency.  Although the amendment was somewhat weakened, I believe it will be effective in reducing any suspicion of impropriety.”

As his hometown newspaper summarized the measure’s final version, “The amendment would not hinder employees from making political contributions, and is limited to corporate entities or partnerships. The prohibition would apply for a twelve-month period preceding and a five-year period following the receipt of an award from the Quick Action Closing Fund. The length of the prohibition ensures it covers each gubernatorial election cycle.”

The quick action fund device has, advocates contend, contributed to successful economic development efforts in Texas and Arkansas. However, Texas Gov. Rick Perry came under fire when journalists reported that recipients of $16 million from the Lone Star State’s similar fund had also contributed to his election campaign.

In a statement sent to CapitolBeatOK last week, Sen. Sparks reflected, “The success of similar economic development tools makes it important that we keep pace. However, controversies in other states have clearly illustrated we can craft a better, more legitimate plan. I believe we’ve done so.”

Sponsors of the legislation in the Legislature this year were state Sen. Mike Mazzei of Tulsa and state Rep. Skye McNiel of Bristow, both Republicans. In comments to CapitolBeatOK, Mazzei said, “As we work to create jobs and grow Oklahoma’s economy, we need to make sure we take advantage of every tool available. This program has generated 3,000 new jobs and $100 million in capital investment in Arkansas.”

He continued, “We’ve got an incredible work force, a low cost of living and many other factors working in our favor when we’re competing for jobs.  What we don’t have is a Quick Action Closing Fund. That changes with this bill.”

State Chamber President Fred Morgan cheered the bill’s passage: “Our state is losing jobs to states like Texas and Arkansas who have similar economic development funds. This legislation will give Gov. Fallin an invaluable tool she can use to recruit companies to Oklahoma and bring jobs and capital to our state.”

While advocating for the bill, Morgan and Chamber allies touted results of a March 2011 Sooner Poll that showed 66% support for such a mechanism (75% among Republicans, 61% among Democrats), with backing in every region of the state.

The Quick Action Fund idea might have benefited from one of the significant transparency reforms of the 2011 legislative session. The measure was discussed last month in the of the first open conference committee hearings in Oklahoma history.

When the House Conference Committee on Insurance and Economic Development met, Chairman Randy McDaniel, an Oklahoma City Republican, pushed for the bill. He said after the committee advanced the bill, “I am proud to be part of a reform effort that is dramatically improving legislative oversight as well as advancing important policy proposals.”

Rep. McNiel reflected, “House Bill 1953 is a significant piece of legislation. It has had the tough scrutiny of the legislative process. This bill has been carefully vetted, and I fully believe it will help make Oklahoma a leader in economic development.”

In the end, the measure prevailed in the House 76-17, then sailed through the Seante 42-3.

The deal-closing fund concept has had a somewhat troubled history. The Opportunity Fund in Oklahoma was created for Governor Brad Henry, a Democrat, when his party still controlled the Senate. It was envisioned in part as a way to get the attention of the Nanjing Automobile Group Corporation of mainland China, when the firm was considering a move to build MGs in Ardmore. However, as noted in an analysis by the Oklahoma Policy Institute, “almost nothing went as planned.”

First, the Chinese company decided to delay a move into the American manufacturing realm. Then, the Oklahoma state Supreme Court ruled that the measure as then structured violated separation of powers. While a few awards were made during the Henry years, no additional money has been appropriated since 2008.

In Texas, the state Enterprise Fund has been dogged not only by the campaign funding controversy, but also by ineffective “clawback” provisions for some ineffective deals. However, Texas has distributed a total of $363 million over the past seven years, and has bipartisan support.

The Tulsa World’s Randy Krehbiel reported that 30 states have such mechanisms, an increase from the eight states which had such programs in 2004.