DE SOTO, Kansas — As construction crews build Panasonic’s new $4 billion factory here, the Kansas tax subsidy law that helped bring the electric vehicle battery plant to the state is set to evaporate.
Kansas officials no longer have the power to underwrite mega-deal projects with hundreds of millions of dollars in state incentives. The law, known as APEX, only let the state ink one deal each year in 2022 and 2023. Those tax giveaways for those two years went to Panasonic and Integra’s planned $1.8 billion semiconductor plant in the Wichita area.
Paul Hughes, the state’s deputy secretary for business development, asked lawmakers to extend the law into 2024 and beyond to keep open the possibility of bartering in tax breaks that might tempt other large employers to Kansas.
Gov. Laura Kelly’s administration touts the law as a way for the state to take an active role in boosting the economy.
“You’re not really the captain of your own destiny,” Hughes said of not extending the law. “At that point, you’re just waiting for something to happen and hoping that it does.”
But some influential conservative lawmakers voiced concern over the program and how much the state was giving away.
Meanwhile, Panasonic could earn $6.8 billion in incentives from the federal government, according to a study by government accountability group Good Jobs First. Add in the more than $1 billion from state and local governments, the company could score $8 billion in tax dollars — twice the amount of its original investment to build the plant in Kansas.
Jacob Whiton, an analyst for Good Jobs First, said federal incentives exceeding the amount of company investment is rare.
“It certainly calls into question,” Whiton said, “the necessity of that state and local package in light of the generosity of the federal credit.”
But Hughes contends the tool is still useful to Kansas, regardless of what the federal government offers to the same projects. He said the state’s focus is on creating Kansas jobs. The federal program incentivizes production no matter where the company is located. He’s also confident lawmakers will extend the law in the future and thinks the state will have data to justify the tax breaks and job training money.
Panasonic broke ground in November of 2022 and is expected to begin using the facility in early 2025. Hughes said the company is also in the process of hiring the local management that will work out of the facility.
Integra is expected to begin receiving federal funding later this year and begin construction on its facility in the fall. Hughes said about 12 other companies are interested in using the program to move to Kansas.
“Once we have a program with a 10-year horizon to it,” Hughes said, “we’ll see our own pipeline swell.”
But Whiton is skeptical the law included enough conditions on business, like creating a certain number of jobs, or that state incentives are even needed. He argues the massive amount of incentives available from the federal government may have made the state’s package redundant. And that’s funding that could have gone to other state programs — like public schools.
Hughes contends Panasonic is not guaranteed to receive either the federal or state incentives. The company has to earn the state incentives through building the facility and hiring employees.
And the federal incentives would come after the company produces a certain number of batteries. That also comes with additional costs much larger than the initial $4 billion on the manufacturing plant in De Soto.
“If they don’t produce it,” Hughes said, “they don’t get it.”
However, some conservative state lawmakers fear Kansas may still hand out more than it can afford. Republican Sen. Caryn Tyson said earlier this year the number of companies interested in the tax breaks suggests it may be too generous.
“If you were putting a product on sale for the market,” Tyson said in January, “and it was selling this – like wildfire — you have to ask yourself, ‘Did we give away too much?’”
Tyson said lawmakers should look at the law closely before signing off on an extension to make sure the state does not provide more than it can afford.
Hughes said Panasonic should have more evidence the incentives actually bring new jobs into the economy later this year. That would fall just in time for Hughes to ask for an extension of the law next spring.
Hughes also said the state is willing to scale down the law to allow for smaller projects with fewer incentives or even set new parameters to make sure the program doesn’t unintentionally bankrupt the state.
“You have to look at it,” Hughes said, “through many different lenses to make sure that you're designing your economy, not just hoping that something happens to your economy.”
Dylan Lysen reports on politics for the Kansas News Service. You can follow him on Twitter @DylanLysen or email him at dlysen (at) kcur (dot) org.
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