Today as America honors Dr. Martin Luther King, almost one in six African-American workers are officially unemployed. Let us remember: the full name of the 1963 event for which he is best remembered was The March on Washington for Jobs and Freedom (emphasis added).
Jobs are front and center today as well, as politicians justify economic development subsidies in the name of jobs, often while citing those suffering high unemployment. Yet we at Good Jobs First have been struck by the spate of journalistic investigations and state government reports finding that many subsidized deals are failing to deliver.
At a time when states are making painful budget cuts, they must be able to recoup taxpayer investments when deals fail. That’s why this Wednesday we will release Money-Back Guarantees for Taxpayers: Clawbacks and Other Enforcement Safeguards in State Economic Development Subsidy Programs. It is the largest study ever performed looking at whether states monitor and verify job-creation claims—and whether they can recapture, or claw back, subsidies when companies fail to create or retain as many jobs as promised.
Consider a sampling of recent job-shortfall news:
Alabama—The Birmingham News reported last winter that, after giving three large companies “wiggle room” on job shortfalls, the state or local governments clawed back money from Louisiana-Pacific, International Shipholding Corp., and U.S. Pipe and Foundry Co.
Connecticut—The state’s Department of Economic and Community Development’s 2010 annual report revealed that in 31 out of 70 audited business assistance contracts, companies failed to meet their job creation targets. The Department has not revealed whether it clawed back money from any of the 31 companies, and if so how much.
Florida—After reviewing data released by Florida officials on subsidy deals dating back to 1995, the Orlando Sentinel calculated three months ago that only about one‐third of the projected jobs had actually been created.
Georgia—The Atlanta Journal-Constitution reported last summer that four subsidized companies that either closed or laid off many workers had not been penalized, that “companies are rarely penalized,” and that the state’s revenue Department monitors outcomes but will not disclose any data about them. Summarizing what it could tell about $469 million in subsidies given out between 2003 and 2009, the AJC concluded: “taxpayers can’t gauge how effectively all the money has been spent, or whether the expenditures were even necessary.”
Illinois—The Chicago Tribune, using the state’s top-rated transparency website, reported last winter that, over nine years, companies awarded Illinois’ costly Economic Development in a Growing Economy (EDGE) tax credits were failing to qualify for them 52 percent of the time, and two-fifths of the projects never qualified for any credits. And as we blogged earlier this month, the state legislature and Gov. Pat Quinn were jolted in December when they gave Sears a massive new tax break to retain its headquarters—and days later, the chain announced more financial losses and more than 100 store closures, putting a cloud over the Illinois jobs.
Indiana—WTHR-TV’s 13 Investigates unit looked into Gov. Mitch Daniel’s claim of 100,000 jobs starting in late 2010. In its much-honored “Reality Check: Where are the Jobs” series, it exposed deals that never broke ground and others that fell far short on jobs or failed altogether. The series provoked the state’s privatized economic development agency to commission an audit of almost 600 deals which found so few jobs that WTHR concluded only 38 percent of the claimed jobs had so far materialized.
Iowa—An investigation by Des Moines Register two months ago found a sharp increase in the number of Iowa companies failing to deliver on subsidized jobs. As many companies had defaulted on tax credit contracts in the most recent fiscal year as the previous three years combined, it found. It also found that the state’s recoupment and renegotiation activity was up.
Massachusetts—A large Boston Globe investigation last winter looked into 1,300 subsidy projects, large and small, that had promised to create jobs. “Hundreds of the projects delivered fewer jobs than promised, and some companies actually slashed employment. Many firms won subsidies for projects they were set to build without state assistance; in some cases, incentives that were approved long after the projects were underway or complete. And many got generous packages though they agreed to create only a handful of low-paying jobs.”
Minnesota—An investigation by The Minneapolis Star Tribune last winter found that that one‐fifth of the companies receiving subsidies in the Gopher State from 2004 through 2009 did not meet their hiring commitments.
Missouri—The Kansas City Star earlier this month examined 91 projects over six years in the state’s Quality Jobs Program. While acknowledging that some deals take years to pan out and that little of the awarded $311 million had been paid out yet, it found that about five out of six deals had not yet met their job goals and total job creation was only one fourth of the projected total.
New Jersey—An independent consultant’s evaluation of the state’s big-ticket Urban Enterprise Program last winter found such poor results that that taxpayers got back only eight cents per dollar invested. It called the program “bureaucratically cumbersome and costly to operate,” and said it “has yielded inconsistent and uncertain quantifiable results in terms of business expansion and job creation in the State’s urban areas.”
New York—The Alliance for a Greater New York (ALIGN) reported two months ago that 274 projects subsidized by Industrial Development Agencies around the state had failed by the time the projects ended in 2009. Instead of creating 21,113 jobs, the companies lost 4,957 jobs. Another 11,000 jobs were lost at firms subsidized for job retention.
North Carolina—The Charlotte News & Observer reported last month that more than 30 percent of the state’s 139 Job Development Investment Grants have been withdrawn or terminated due to lack of promised jobs or investment.
Ohio—Attorney General Mike DeWine issued a report three weeks ago that revealed 48 percent of subsidized companies had failed to meet their pledges for job creation, job retention, or other performance requirements. It named 200 shortfall companies that had received grants, tax credit awards or other subsidies totaling more than $82 million. Clawback details were mixed. And as Good Jobs First detailed in a report last July, the quality of Buckeye State disclosure has been deteriorating, making it harder for taxpayers to track outcomes.
Rhode Island—The Providence Journal reported last summer that for two years in a row, the state has issued a report required by an accountability law, but leaving out job-creation numbers. The state filings detail costs—$127 million given out over three years—but leave out the benefits. Both state reports also failed to include an independent analysis of program effectiveness that is required by the accountability law, reported ProJo.
South Carolina—The Associated Press (headline: “SC gov using inflated job list in employment boast) incurred the wrath of Gov. Nikki Haley when it reported last summer that her commerce agency provided four different job-creation totals—and that some of the listed jobs did not result from any state aid. As well, one large group (750 more jobs at an Amazon warehouse) resulted from a tax-break deal the state legislature enacted over her opposition. Separately, the Greenville News reported last May that the state had clawed back only twice in five years (and one was initiated voluntarily by Michelin).
Texas—Texans for Public Justice last fall examined 115 deals of the state’s controversial Texas Enterprise Fund (TEF) program. Among 65 projects in 2010, it found most were non-performing (37 percent), terminated (17 percent), troubled (11 percent, usually due to job shortfalls), exhibited fraud (8 percent, including some of the program’s largest grants that had deceptive job claims), or weak (2 percent, for claiming jobs that predated the TEF contract).
Wisconsin—An investigation by Gannett last November found that 40 percent of companies in Wisconsin that completed job‐creation tax credit contracts during the past five years failed to hire as many people as they had promised.
So many failed deals beg the question: are cash-strapped states watching the store? Are they able to recover money from non-performing companies?
For the answers, stay tuned this Wednesday!