Despite the fact that many economic development deals fall short on job creation or other benefits, states are inconsistent in how they monitor, verify and enforce the terms of job subsidies. Many states fail to verify that companies receiving subsidies are meeting commitments, and many more have weak penalty policies for addressing non-compliance.
These are the findings of Money-Back Guarantees for Taxpayers: Clawbacks and Other Enforcement Safeguards in State Economic Development Subsidy Programs, a study published today by Good Jobs First, a non-profit, non-partisan research center in Washington, DC. It is online at www.goodjobsfirst.org.
“It is not enough for states to have good job-creation and other performance requirements on paper in their subsidy programs; they must also enforce them diligently and consistently,” said Good Jobs First Executive Director Greg LeRoy. “Strong standards and strong enforcement are inseparable in making sure subsidy programs are not mere corporate giveaways,” added Philip Mattera, research director of Good Jobs First and principal author of the report.
Using a scoring system covering performance standards and enforcement, Money-Back Guarantees rates 238 programs in 50 states and the District of Columbia on a scale of 0 to 100. Other findings:
- Ninety percent (215) of programs require companies to report on job creation or other outcomes. Yet in 31 percent of those programs, the agency doesn’t verify the data.
- Three-quarters (178) of the programs use penalties such as recapture of benefits already provided (clawbacks) and the recalibration or termination of future subsidies. Penalty provisions in 84 programs are weakened by the fact that their implementation is discretionary or allows exceptions.
- Only 21 programs publish aggregate enforcement data; 38 list non-compliant companies; 14 list penalized companies.
- The states with the highest averages are Vermont (79) and North Carolina (76); the lowest: District of Columbia (4) and Alaska (19).
- Recipients should always be required to report on job creation and other benchmarks—and the data should be verified.
- Agencies should penalize non-compliant recipients. Performance-based programs should operate without penalties only if recipients are required to fulfill all requirements before receiving subsidies.
- Penalty systems should be not be weakened by exceptions or discretion on whether to implement them. Agencies should publish online data about enforcement.