From the Wall Street Journal:
Rising unemployment has touched off a race among state governors to woo companies with tax breaks and financial incentives, even as budget shortfalls force cuts in education, health care and other services.
Governors from both parties and from states large and small are counting on the federal stimulus package—passed by the House last week and headed for the Senate—to perk up their economies and create tens of thousands of new construction jobs, but they're not convinced it will be enough. So they've laid out urgent calls to chase private-sector jobs with public money.
Under Gov. Jon Corzine, a Democrat, New Jersey has promised to send small businesses a $3,000 check for every new hire. Minnesota Gov. Tim Pawlenty, a Republican, calls for an expansive package of business tax cuts, including tax-free zones for companies that create "green jobs."
Other states are considering establishing multimillion-dollar loan funds for entrepreneurs, phasing out the corporate income tax, and pledging financial backing to banks willing to extend lines of credit to small businesses.
As he prepared his budget last week, Missouri Gov. Jay Nixon, a Democrat, could hear the chants from a rally of child-welfare advocates outside his office window. Mr. Nixon said he expected anger over his plan to slash the state work force by 1,300 and eliminate or trim dozens of programs. Among his proposals: a $14.6 million cut for university extension courses, a $3.4 million cut for rural health care, and a $250,000 cut for early-childhood literacy programs.
Mr. Nixon says he needs those savings to balance the budget while still expanding—by about $20 million—incentive funds that underwrite corporate job creation. Mr. Nixon's staff cites a deal announced last July with Orgill Inc., a national hardware wholesaler, which received more than $7 million in state aid to build a distribution center in rural Sikeston with a goal of creating 350 jobs.
That amounts to a subsidy of $20,000 per job, but officials expect the state treasury to recoup that many times over in taxes paid by the newly employed.
"Everything stems from jobs," Mr. Nixon said. "Now is not the time to back off the field of economic development."