The Ripple Effect of Senate Bill 101 on Economic Development
by Kelley Rendziperis & Brian Merrion, on Apr 17, 2015 4:14:00 PM
In light of recent legislation signed in late March by Indiana Gov. Mike Pence, major employers across the Hoosier State were swift to voice their opposition to Senate Bill 101. Officially titled the “Religious Freedom Restoration Act,” the law allows a broadly defined scope of entities, including individuals and incorporated companies, to assert that their exercise of religion has been, or is likely to be, substantially burdened as a defense in legal proceedings. Opponents of the law say its ambiguity may provide a legal defense for a company accused of denying service to an individual due to religious beliefs. More specifically, opponents are concerned this will condone discrimination based on sexual orientation.
Among the companies raising concerns over the new law are Eli Lilly & Co., Anthem, Angie’s List, Cummins Inc., and Salesforce.com – all of which have major operations in the Indianapolis metropolitan area. Per the IndyStar, CEOs around the state collectively signed a letter to the governor, expressing that they are “deeply concerned about the impact (Religious Freedom Restoration Act) is having on our employees and on the reputation of our state.”
The ramifications of the law have quickly impacted Indiana’s economic development efforts. Within days of the legislation being signed, Angie’s List, an online business reviews outlet, suspended the expansion of its headquarters site in Indianapolis. As reported by The Guardian, the company put on-hold the addition of an estimated 1,000 new jobs over five years and also a proposed economic incentives package totaling an estimated $18.5 million. In addition to the move by Angie’s List, CNN reported that Salesforce CEO Marc Benioff “has granted transfers and hefty relocation packages to several employees who asked for them.”
According to data from the Indy Chamber, the Angie’s List expansion is tied for first atop the list for the largest business openings and expansions since January 2014 in the Indianapolis metropolitan area by estimated employee count.
|Company||Business Activity||Estimated Employees|
|Hat World dba LIDS Sports Group||Expansion||450|
|Carrington Mortgage Services||Opening||360|
|Tempur Sealy International||Opening||300|
In response to the backlash, Gov. Pence signed into law a revised version of Senate Bill 101 in early April. The amended law now includes wording specifically protecting individuals based on “sexual orientation” and “gender identity,” and denies the ability for Senate Bill 101 to be used as a legal defense to discriminate based on sexual orientation. What does all of this mean for business investment and economic development in Indiana? Will other states with similar laws begin to experience the same reaction from their largest employers?
Just weeks after passage of Senate Bill 101 in Indiana, the state of Arkansas approved a similar religious freedoms act. After taking immediate feedback in opposition to the legislation from Wal-Mart, Arkansas’ largest employer, Gov. Asa Hutchinson signed the revised amendment into law. Arkansas’s amended version only specifically mentions governmental organizations rather than including individuals and businesses, prompting opponents to demand specific anti-discrimination language as found in the revised Indiana amendment.
Meanwhile, the state of Alabama’s “Alabama Religious Freedom Amendment” has been included in its state constitution since 1998, but legislators are now proposing a revision to the law making it more in-line with those in Arkansas and Indiana. It has yet to be determined what scope of anti-discrimination protections will be included and if it will be signed into law by Alabama Gov. Robert Bentley. We may see many other states grappling with this issue because 21 states have similar laws; however, many of them already have sexual orientation as a protected class.
All of this upheaval comes on the heels of Indiana’s own highly publicized business development efforts to lure Illinois companies across the state line by promoting a more favorable tax environment. Despite the success Indiana had in attracting businesses across state lines, the passage of Senate Bill 101 may significantly hamper its future attraction efforts. Thus, the state of Indiana has hired a public relations firm and is beginning to spend millions of dollars in an attempt to reverse the negative image garnered over the past month. It remains to be seen exactly how great of a financial impact Senate Bill 101 will have on the state’s business environment.
Economic incentive packages offered to growing or relocating companies may begin to be overlooked by CEOs who favor more positive and inclusive environments within the overall community they serve. Or will this mean states with similar negative perceptions will have to offer larger incentive packages to remain competitive?