Not surprisingly, the agenda included a special session on the use of incentives in attracting and retaining businesses.

That's because no matter which side of the political fence you fall on, there's no debating the fact that when a state or local community offers a large incentives package to a current or potential employer it sparks a firestorm of controversy.

For years, though, the criticism of was seemingly doused by economic prosperity. Throughout the 1990s, virtually any company looking to expand or relocate could choose from a wide array of enticing incentives offered from the various states competing for their project.

Depending on the level of investment or the number of jobs created, a company could save millions on work force development and infrastructure improvements, as well as take advantage of generous tax breaks for five, 10 or even 20 years.

But the current economic woes, particularly at the state level where many governments are facing record budget deficits, could mean fewer tax-credit carrots dangling in front of growing companies in the immediate future.

What impact will these cutbacks in incentives programs have on business expansion projects and job creation? Could some states potentially suffer more than others? And just how important are incentives, anyway?

These are questions we posed to site-selection experts across the country. While all agree that incentives are important, opinions vary widely as to what impact a reduction would mean to the overall business climate.

"Incentives are more important than ever in the site selection process," said Pat Herrera, vice president of state tax incentives programs for East Brunswick, N.J.,-based Mintax Inc. "Competition is fiercer, the economy is tighter, profit margins are smaller and costs are always rising."

Incentives alone don't create jobs or increase investment, but they do play a valuable role in site selection.

"What they have always been, and will continue to be, is a determining factor in where, when and, potentially, how much," Herrera said. "For existing facilities, where business factors require a ramping up of investment or employment, the tax credit, abatement or grant may influence the overall growth rate, the size of the investment and even hiring patterns."

But Clark Gillespy, managing director of Fluor Global Location Strategies, said there's one thing incentives can never do.

"Incentives can never make a bad site good," Gillespy said. "Instead, incentives should be used to differentiate two very equal sites."

That's why Gillespy doesn't believe the current economic landscape is forcing companies to reconsider projects already on the table.

"Typically, companies do not make expansion or greenfield site selection decisions based on state budget cuts," Gillespy said. "Companies expand because of capacity needs and/or constraints, new product launches, opportunities for greater market share, competition or various 'business-related' issues. State budget cuts may influence a particular site location possibility, but should not hinder a company’s decision to expand."

Jim Beatty, president of NCS International Inc. and www. callcentersites.net, believes some cuts, particularly those dealing with job training incentives, could put a state in harm's way.

"States have gotten very creative with the training dollars," he said. "They can be used for screening, testing, selecting and pre-employment, as well as training on the job. This would be a significant out-of-pocket expense. If a state is not offering these incentives, I think two things will happen — that state will be taken out of consideration or the expansion will be reduced."

Dennis J. Donovan, director of global site selection for Grubb & Ellis, said those types of wholesale changes aren't taking place at this point. In fact, in some cases, states are becoming more creative with public-private partnerships and the lowering of initial investment and employment benchmarks.

"The cutbacks have been more in the form of program restructuring, such as changing eligibility requirements," said Donovan, who cited Arkansas, New Jersey and Kansas as examples. "I don't know of any states that have completely eliminated their flagship incentive offerings. In fact, two states are offering significant, new programs: the Capital Investment Tax Credit in Massachusetts and the Governor's Opportunity Fund in Texas."

J. Michael Mullis, president and CEO of Memphis-based consultant J.M. Mullis Inc., said his clients also are continuing to find competitive and viable incentive packages.

But Beatty said the fact that those deals are becoming harder to find is not a good sign.

"States are definitely sharpening their pencils and doing a cost-benefit analysis on a project-by-project basis," Beatty said. "But states can't stay out of economic development. I believe they have to look out to the private sector for some assistance. I don't think states can cut staff, cut economic development and think that business will continue as usual.

"It sends a very negative message to business and a dangerous message to the state to cut back on the one thing — economic development — that brings new industry and new jobs into the state," he pointed out. "I'd be very cautious about placing any company in that state."

Herrera agrees with the idea that governments need to grow their way out of the current deficit dilemma.

"Tax increases alone will never solve the problems, and too many programs are mandated by law and cannot be reduced to a point where the savings will offset budgetary problems," Herrera said. "By offering specific incentive packages that are tied to a corresponding set of revenue offsets, incentives can actually be a revenue generator for states, regions and communities."

Dan Perkins is a freelance writer based in St. Louis.