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Texas on Thursday launched a new economic incentives program intended to bring new companies and jobs to the state, replacing a prior job creation system that lawmakers phased out after complaints that it contributed to inequity in public schools.

Gov. Greg Abbott announced the opening of applications for the Texas Jobs Energy, Technology, and Innovation, or JETI, program. Passed with bipartisan support by lawmakers last year, it will provide property tax cuts to eligible companies that move into Texas communities in exchange for job creation.

It replaces Chapter 313, the widely criticized old abatement program that expired at the end of 2022. The new program includes more oversight of participating companies, introduces additional job and salary requirements and halves Chapter 313’s property tax cuts.

“Texas is America’s jobs engine, thanks to our welcoming business climate, robust infrastructure, and skilled and growing workforce,” Abbott said in a statement Thursday. “But we cannot be complacent as we now compete both nationally and globally in industry sectors critical for growth tomorrow.”

Through the new program, companies can apply to receive a 10-year reduction in their property taxes that help fund the operations of local school districts. Using its general revenue fund, the state will pay school districts to partially restore tax money lost to cuts. Budget analysts say it’s unclear how much taxpayers will shoulder the cost of tax breaks for companies.

The program eliminates an oft-criticized feature of Chapter 313 — companies can no longer make direct payments to schools in return for tax breaks, a provision critics say caused inequality in school funding.

The passage of the new program last year came after Abbott faced pressure from business leaders to quickly replace Chapter 313, which generated over 14,000 new jobs statewide through 2021. Amid increasing criticism of Chapter 313 as “corporate welfare,” the state Senate in 2021 declined to renew the program for the first time in its 20-year history.

Texas felt the impact of losing Chapter 313, Abbott said last February, acknowledging that its expiration contributed to the state losing out on a “massive” corporate project to New York in 2023. After he promised to make economic development an immediate priority, he signed the new program into law in June.

Companies that participate in the new program are also required to create a specific number of new full-time jobs, salaried or contracted, with health benefits and competitive pay for salaried positions. Companies also must submit reports to the state on their compliance with these standards every two years.

Each company will receive a 50% abatement, unless their projects are located in economically disadvantaged areas that have been designated as “opportunity zones” by the federal government, where tax cuts are stretched to 75%. Lawmakers say this incentive should encourage development in the state’s rural communities.

Not all companies that could apply for tax cuts through Chapter 313, or the Texas Economic Development Act, will qualify for the new program. Wind and solar companies — predominant participants in Chapter 313 — and battery power storage projects are all excluded from participating.

That change follows criticism of renewable energy companies, which some conservatives allege abused Chapter 313 to obtain unreasonable assistance in a state dependent on its oil and gas industry.

Eligible companies include those that support manufacturing, the development of natural resources, hydrogen fuel production and carbon capture facilities, technologies like semiconductor chips, and innovation including research and development firms.

Before companies that apply can move into Texas communities, school districts in considered areas will host public hearings to decide whether more state evaluation is necessary. The state comptroller can set a one-time fee up to $30,000 to cover evaluation costs, paid by companies.

If companies that are out of compliance with stipulations of the new program, like job creation or salary thresholds, the governor or school district can end deals at any point.

The new program is located in Chapter 403 of the state’s tax code, and will expire in 10 years if legislator’s do not renew it sooner.

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