Days after receiving a 12-percent reduction in 2009 funding, Department of Commerce officials pleaded their case to a Senate committee in hopes of staving off even greater budget losses in fiscal year 2010 or even the possibility of outright elimination.
“We provide the technical expertise to win deals,” Commerce Interim Director Kent Ennis said on Feb. 3 as he explained the agency’s business-recruitment functions to members of the Senate Committee on Commerce and Economic Development.
The department has a strong ally in the committee’s chairwoman Sen. Barbara Leff, R-Paradise Valley, who heaped praise on the agency on several occasions, calling it the “world’s best kept secret” and the most “underappreciated agency out there.”
But other members of the committee appeared more critical while delivering questions about the effectiveness of department satellite offices in foreign countries, the results of the agency’s handling of motion picture-tax credits and whether the department merely assumes duties of local governments and the private sector.
“Isn’t that the job of the city councils and chambers of commerce, to attract jobs?” asked Gilbert Republican and Senate Majority Leader Thayer Verschoor.
Ennis replied that the duties were not “duplicative,” because local chambers of commerce and councils and are often unaware of out-of-state or international businesses looking to expand or they simply lack the resources to pursue opportunities.
Ennis, together at times with assistant directors Jaye O’Donnell and Lisa Danka, made the case that budget allocations to the department should be viewed as an investment that creates a profit for the state.
The department, among other functions, strives to bring “base industries” to Arizona that tend to export products, bring in new cash, pay high wages and create a multiplying effect throughout the economy, he said.
At the meeting, the department took credit for the relocation or expansion of 131 projects in Arizona during the past three fiscal years, but Verschoor pointed out the lack of any business representatives to testify on behalf of the agency. He said the inclusion of feedback from the private sector would have been “worthwhile.”
Department officials said their efforts attracted $2.6 billion in capital investment to the state, $26 million in additional property tax revenues and an estimated $1.2 billion in annual payroll during the 3-year period.
On Jan. 30, lawmakers called a special legislative session to fix the state’s $1.6 billion budget deficit for fiscal 2009, pulling $875,000 from the Department of Commerce, which was originally slated to receive $7.4 million in state funding for the fiscal year that ends June 30.
In addition, lawmakers swept $34.4 million from agency-operated funds for job training, the Commerce and Economic Development Commission, Greater Arizona Development Authority and military installations.
Much of the job training fund is provided voluntarily by employers, and the sweeps amount to a troubling series of “broken promises” that could give prospective employers reasons to reconsider establishing ties with Arizona, said Sen. Debbie McCune Davis, a Democrat from Phoenix, adding she believes the department skillfully matches employers with compatible communities.
Ennis said the state Constitution’s gift clause already puts Arizona at a job-luring disadvantage with other states because it stops the state from packaging tax abatements and grants.
Leff, of District 11, later said she believed the state’s budget problems only underscore the need to attract a new and wider business base. Other states, she said, have even cut education spending to kindergarten through eighth grade to put money toward employer-recruitment efforts.
“This isn’t a time to be moving backward when everyone else out there is trying to attract these jobs,” she said.
Lawmakers during the meeting did not discuss elimination of the department, although a previous 2009 budget-fix proposal by Senate and House Appropriations Committee chairmen Russell Pearce and John Kavanagh called for its demise.
Kavanagh told the Arizona Capitol Times that many people view the agency as unnecessary and duplicative of other efforts by private and public entities. Others oppose the department, believing the government should not play a role in attracting businesses, he said.
The Fountain Hills representative said he has not yet decided whether the agency should be eliminated in the 2010 state budget, a move he said would be “pretty drastic.”
Kavanagh said he would prefer to hear “both sides” of the debate before drawing any conclusions, but noted that universities also conduct economic research, while chambers of commerce lobby to attract businesses and community colleges offer job training services.
“Clearly, there could be a lot of duplication here and I think that’s worth taking a look at,” he said. “I certainly haven’t come to any final judgment on it.”
The agency’s abolishment also was urged in December by the Goldwater Institute, which argued critical functions of the agency could be shifted to other departments. The institute noted that the federal Small Business Administration also provides business-related services.
After the meeting, Ennis said he believes the agency’s main deficiency has been touting its achievements. That casualty is the result of paying closer attention to its duties, he said.
He said he did not know who in Legislature might push for the agency’s elimination, but he viewed that action as a possibility.
“We hope to live again for another day and another year,” he said.