Archive for the ‘Economic Recovery’ Category

NYC Living Wage Debate Boils Over, Into the Streets and before City Council

May 17, 2011

It’s budget season in New York City, when community groups and labor unions usually take to the streets to protest proposed budgets and this year proposals including teacher layoffs and social service cuts was a serious call to action. But marchers also had an added demand: a living wage at subsidized companies.  May 12 was planned as a day of action; it also was the day the New York City Council Committee on Contracts held a public hearing on the proposed “Fair Wages for New Yorkers Act”. The bill would require firms that receive certain economic development subsidies to pay a “Living Wage” of $10.00 an hour or $11.50 an hour if no benefits are provided.

Mayor Michael Bloomberg opposes the bill and the Speaker of the City Council Christine Quinn is undecided but the momentum is building with 30 co-sponsors (out of 51 members). The bill excludes many small businesses and only covers some subsidy programs. (more…)

Tough Love for California TIF

February 25, 2011

California Gov. Jerry Brown is proposing extraordinary revenue- raising plans to tackle the state’s $28 billion budget deficit.  The Brown Administration has proposed that the state dissolve the state’s community redevelopment agencies (CRAs), regional quasi-public bodies charged with administering redevelopment dollars.  Tax increment financing (TIF – the mechanism through which redevelopment is funded) is an enormous expense in California, representing $5.8 billion in diverted tax revenues a year.  The current proposal would retire current redevelopment debts with agencies’ existing funds, allowing the $1.7 billion to be applied towards the state budget.  Remaining funds would be returned to local governments and school districts.

Unlike the Enterprise Zone program, also slated for elimination by the Brown Administration, redevelopment in California actually does provide some clear benefits to the state.  TIF plays a significant role in providing affordable housing in California:  twenty percent of all TIF revenues must be set aside for affordable housing projects.  When properly harnessed, redevelopment can spur equitable revitalization.  Some of the most successful community benefits agreements in the country come from Los Angeles, where LAANE and other organizations have leveraged redevelopment funds to provide good jobs and affordable housing to underserved communities.   Madeline Janis, executive director of LAANE, Vice Chair of the Los Angeles CRA Board, and board member of Good Jobs First has argued that reform – not elimination – of CRAs is the best way to advance economic recovery in the state.

Reform would help to address the overuse of redevelopment dollars in California.  A February report by the Legislative Analyst’s Office found that CRAs in some counties have created so many projects that more than 25 percent of all property tax revenue is allocated to the agency.  One needs to look no further for examples of irresponsible use of TIF funds than San Jose and Oakland.  Both cities are scrambling to assemble and approve new subsidized professional sports stadium plans before the state can move to recapture redevelopment funds.  Cities throughout California are moving decisively to spend or otherwise encumber their accumulated redevelopment funds.

California’s $28 billion budget gap is unparalleled, but budget pressures are bringing tough love to the economic development-industrial complex around the country.  Getting back to basics is critical. Programs that pay companies to do what they would have done anyway – that fail to meet the definition of the word incentive, that don’t correct market failures – are deservedly vulnerable.  It’s only fair, given deep cuts being proposed for aid to children, seniors, students and the unemployed.

The Recovery Act: The Transparency Gift that Keeps on Giving

February 18, 2011

Largely lost in the partisan bickering over the stimulus has been the law’s enormous positive impact on improving government transparency. The American Recovery and Reinvestment Act of 2009 (ARRA) is not just the most transparent federal spending bill in U.S. history—the changes it pioneered will endure even after the stimulus winds down.

By now, many curious Americans have explored spending and job-creation on ARRA projects in their communities at recovery.gov. About 35 percent of ARRA funding is revealed there: every grant, loan and contract. And the reporting extends beyond the primary recipient one level down to sub-recipients. But few people noticed that the Office of Management and Budget applied that extended reporting to the main federal disclosure website USAspending.gov (created thanks to a bill championed by then-Senator Obama).

Even fewer people noticed that the quality of ARRA data improved greatly in October 2010: we can now trace the money as it changes hands three times, instead of two, to sub-sub-recipients. For people concerned about companies tied to political contributions, offshoring of jobs, violations of workplace laws, etc., this deeper data is a potential gold mine for accountability.

In a little-noticed provision, the Recovery Act also required privately-held companies that do a large share of their business with the federal government to reveal the compensation of their five highest-paid executives. We blogged about this when the first round of data came out, revealing executive pay at the high-profile “Beltway Bandit” consulting firm Booz Allen Hamilton.

The Recovery Act has also enabled a side-by-side analysis of transportation spending—comparing job creation from highway-building versus public transportation—that was simply not possible before: apples-to-apples data did not exist. However, in early 2010 Smart Growth America, the United States Public Interest Research Group and the Center for Neighborhood Technology issued “What We Learned from the Stimulus,” finding that transit construction creates 84 percent more work-months than does highway-building. That reinforced our own 2003 finding, in “The Jobs Are Back in Town” that smart growth creates more work for Building Trades union members than does sprawl.

ARRA data and the mapping functions at recovery.gov have also encouraged more people to think about the geographic distribution of government spending (one of our pet peeves here at Good Jobs First). For example, the Voices of California Coalition examined ARRA spending by local jurisdiction and found many hard-hit communities getting little if any dollars and jobs.

In New York City, Community Voices Heard coupled ARRA jobs data along with data from the local public housing authority and its own door-to-door survey work to prove that, despite HUD Section 3 rules intended to ensure that public housing residents get job opportunities when their residences are rehabilitated, very few ARRA-funded jobs went to New York City Housing Authority residents. See “Bad Arithmetic.”

In Texas, the Center for Public Policy Priorities reported on that state’s performance on weatherization spending and Policy Matters Ohio mapped where clean energy jobs were created, finding they were “well targeted to areas of economic distress.”

Finally, we here at Good Jobs First have closely monitored how state governments have mirrored Uncle Sam’s ARRA transparency boost, publishing two “report card” studies on state government Recovery Act websites. Every single state put up such a website—even though they had no legal obligation to do so!

Of course, the states did have more obligations than anyone else to provide ARRA jobs data, since so much of the money flows through state agencies, making them primary recipients. So it was no exaggeration to call ARRA “a giant crash course on disclosure for state governments.” And lo and behold, in December 2010 when we revisited the issue of how well state governments disclose their own spending for job creation, we found the number of states naming names online had jumped from 24 to 37.

California Targets EZ Program for Elimination

February 15, 2011

Facing a budget hole estimated at $28 billion, the administration of California Gov. Jerry Brown has proposed program cuts that have economic development officials panicking.  The Enterprise Zone program, which subsidizes in-zone businesses with hiring tax credits, deductions, and exemptions, is a prime target for revenue-starved California.

The program’s history is controversial.  A host of research has thoroughly debunked the claim that EZs have a significant impact on job creation.  (See the Public Policy Institute of California, whose study we covered on this site in 2009;  the state Legislative Analyst’s Office in March 2010 and again this year; and most recently, the California Budget Project.)  In its February report, the California Budget Project describes a number of troubling aspects of the program:

  • The cost of EZ tax credits and deductions has increased by 35% per year on average since its inception.
  • 70% of EZ tax credits to go corporations with assets of more than $1 billion.
  • The EZ hiring credit does not require the creation of new jobs (many recipients simply relocate jobs).

Only one study has been released in recent years in defense of the EZ program.  A 2009 study released by USC’s Marshall School of Business reported favorably on the economic effects of the program.  (This study is not available online.)  It was rebutted by Robert Tannenwald, then a Senior Fellow at the Center on Budget and Policy Priorities, who stated that the study’s findings “fly in the face of empirical evidence and economic theory.”

Whacking the EZ program would save the state $343 million this year.  That figure increases to $600 million annually in just two years’ time.   Elimination of a program that has negligible impact should be an easy decision for the state legislature.  These funds would be better spent in an economic development program with a proven track record.

Recovery Act Groundhog Day: ARRA Jobs Data Continue to Perplex

January 31, 2011

The sixth round of Recovery Act recipient data (covering the fourth quarter of 2010) has just been posted on Recovery.gov, and it feels like something out of the movie “Groundhog Day.” As with every previous round, the employment figures are both disappointing and frustrating. The disappointment comes from the fact that the total number of full-time equivalent jobs associated with ARRA funding in the quarter declined sharply, dropping more than 13 percent to 585,654. The drop in the previous quarter was about 10 percent.

The numbers are frustrating, because the very same anomalies I’ve been blogging about each quarter refuse to disappear. These include the strangely low job figures reporting by many ARRA grant and contract recipients. Of the 57,000 grant prime recipients reporting employment numbers, only 406 report more than 100 FTEs; among the nearly 13,000 ARRA prime contractors working directly for the federal government, the number is only 45. The average FTE among grant prime recipients is only 9, even though they have received an average of $1.7 million in ARRA funds; for federal contractors the FTE average is 4 despite an average payout of $1.1 million.

And once again, thousands of recipients report de minimis results, including more than 14,000 listing a fraction of one FTE. Some go as low as 0.01.

Moreover, the zero-job phenomenon is still present. As in previous quarters, a massive number of prime recipients (more than 23,000 this time) assert that their employees (and those of subrecipients), did not perform a single hour of work in connection with their ARRA grant or contract. If we exclude those whose project status is listed as “not started” or “less than 50 percent completed,” we are left with more than 13,000. If we then remove those that have not yet received any ARRA funds, we still have more than 12,000 (12,739 to be exact) zero-reporters. This is up from 10,772 in the previous quarter.

The Obama Administration and the Recovery Board continue to remain silent on these puzzling figures, and once again we are left to ask whether recipients are intentionally underreporting their job numbers. We know from overall unemployment data that many employers are refusing to expand their payroll because of weak demand for goods and services. But there is no good reason for companies that are carrying out well-paid projects for the federal government to claim that they are doing so with no workers at all.

Criticized Texas Subsidy Program Takes a Big Haircut

September 2, 2010

State tax revenues are in a tailspin as housing values decline. Every state is feeling the heat and making tough decisions. With the budget in dire straits, Texas’ Governor Rick Perry has proposed an across the board 10 percent reduction, which surely will result in painful consequences. But one cutback we’re not teary-eyed over is Gov. Perry’s announcement to thin some big economic development programs.

Yesterday, Gov. Perry proposed shaving off $38.7 million (out of the $256.5 million available) from the Texas Enterprise Fund (TEF) and the Emerging Technology Fund. Texas also trimmed back on controversial film subsidies.

Recent reports have accused the Governor of using TEF for political patronage and failing to protect the taxpayer’s buck. Whatever the reason, even a terrible fiscal climate, we laud reining in on programs that aren’t effective and are apt to be abused.

As this recession wears on, we wonder whether states will choose to take a closer look at the $30 to $60 billion spent each year on economic development, often to the benefit of a few companies which have the boldness to ask for our tax dollars.

Right questions, wrong decisions on subsidies for big firms in NYC

August 5, 2010

Deloitte has an office in the city's municipal building on the same floor as the City Comptroller

At the New York City Industrial Development Agency’s public hearing last week, two proposals generated notable controversy: one to bestow millions in tax breaks on Big Four accounting firm Deloitte LLP, and another to revive a subsidy agreement from 1998, still worth millions in unused credits, for information services giant Thomson Reuters. This past Tuesday, the IDA board approved both projects, but not before a handful of board members engaged in a robust dialogue with IDA staffers, especially on the Thomson Reuters proposal.

The Deloitte proposal could have benefited from an even more vigorous discussion. For one thing, it smells like the same old game in which companies pit states and regions against each other in bidding wars for investment. As an IDA staffer explained, the agency “took seriously” a “threat” that Deloitte would leave the city for “other opportunities,” namely New Jersey. (Deloitte LLP plans to use the subsidy to help pay for moving its headquarters from one highly prized Manhattan office location—midtown—to another—Lower Manhattan.) And yet IDA staff also reassured the board that the proposal wasn’t about retention, but about growth. As EDC President Seth Pinsky stated, Deloitte will get no benefits until it increases its employment numbers within NYC. (more…)

Recovery Act Job Reporting Problems Persist

August 1, 2010

The fourth round of Recovery Act recipient data (covering the second quarter of 2010) has just been posted on Recovery.gov, and the numbers are again perplexing. The issue I’ve written about before — the large number of recipients putting a zero in the jobs column — endures, but first I want to address problems relating to those who do cite an employment impact of their ARRA contracts and grants.

The somewhat good news is that the total number of full-time-equivalent jobs associated with the forms of ARRA spending covered by the recipient reporting system rose to 755,000 from 682,000 during the previous quarter. Yet that gain of 73,000 jobs didn’t put much of a dent in the 14 million-person army of the unemployed.

An examination of the spreadsheets underlying the totals reveals many more frustrating trends. The first is that just one of ARRA’s scores of programs accounts for a disproportionately large share of the jobs. The State Fiscal Stabilization Fund (SFSF) accounted for 306,000 of the jobs, or 40 percent of the total. The problem is not with SFSF itself, which has done an important job in helping state governments weather the economic crisis, thereby allowing many public employees to keep their jobs and not swell the ranks of the unemployed.

Rather, it is the fact that just about everything else has been disappointing. Of the 73,000 grant and contract recipients providing employment numbers, 67,000 report fewer than 100 jobs. Scrolling through the spreadsheets, one is confronted with the dismaying sight of thousands of recipients reporting trivial numbers of jobs. Nearly 15,000 recipients report only a fraction of one job, down to the absurd listings for .01 jobs.

The average number of jobs per recipient is only about 10 — while the average amount of ARRA funding recipients have already gotten is $1.1 million. Excluding SFSF, the jobs average falls to about 6. Overall, the cost per job (in terms of ARRA funds already received) for non-SFSF programs is about $117,000, while for the dozen states with the highest SFSF numbers, the cost is only $72,000.

There is also a significant difference between grant recipients and contract recipients (the latter refers only to those working directly for the federal government). For grant recipients overall, the cost per job is $103,000, while among contract recipients it is $159,000. While some of the grant money ends up being used by states to award their own contracts, the discrepancy suggests that states do a better in creating job with their ARRA money than do federal contractors.

This brings us to the issue of the zero-job reporters. As in previous quarters, a large number of recipients (some 24,000) claim that their employees performed no work at all in connection with their ARRA grant or contract. Many of these projects have not yet started work or are not very far along. If we exclude those whose status is listed as “not yet started” or “less than 50% completed,” we are left with 9,298 recipients. If we then exclude those reporting they have not yet received any ARRA funds (which is hard to believe when a project is at least half done), then we are still left with 8,566 zero-job reporters. This is up from 6,806 in the previous quarter.

What are we to make of the large number of ARRA recipients claiming either no jobs at all in connection with their contracts and grants or a microscopic employment impact? There are at least three possibilities.

The most benign is the matter of timing. Some of the projects reporting low job numbers are just getting started, even though we are well into the second year of the Recovery Act. Others may have already been completed before the last quarter or were winding down during that period, causing them to have few jobs to report. (The employment reporting is not cumulative.)

A more serious issue is the possibility that many recipients still do not understand the rules for job reporting. There was considerable confusion over the original regulations, which required recipients to calculate jobs created and jobs retained, so the Office of Management and Budget adopted a new system. Recipients are now supposed to tally all hours of work associated with ARRA projects, even if the position is not a new or retained one. It appears that many of them are still mixed up and are reporting unrealistically low numbers.

Finally, there is the possibility that many ARRA recipients are demonstrating the same inclination seen among U.S. employers in general these days: In the face of economic uncertainty, they are minimizing their hiring. In doing so, they are thwarting the intended job creation aspect of the Recovery Act.

When ARRA was first being debated, many critics charged that all that government spending would be rife with waste and fraud. That does not seem to have materialized on a significant scale, but perhaps we need an investigation of whether many employer recipients are abusing the Act by not using the funds to put more people to work.

More ARRA Recipients Appear to be Underreporting Jobs

May 3, 2010

The Recovery Accountability and Transparency Board has just posted spreadsheets with the third round of recipient data, covering the first quarter of 2010. After analyzing the data, I found that the phenomenon I wrote about in connection with the first and second quarters is unfortunately still with us. Large numbers of employers are reporting zero jobs generated on ARRA-funded projects that are well under way or even completed.

The new spreadsheets on Recovery.gov include more than 28,000 projects with a zero in the jobs column. Many of these, however, have not yet started work or are not very far along. If we exclude those whose status is listed as “not yet started” or “less than 50% completed,” we are left with 1,511 federal contracts and 6,152 grants, or a total of 7,663.

I then looked at the column showing how much each project has actually received in ARRA funds. Some of the 7,663 report they have not received any funding yet. If we remove those, we are left with 6,806.

In other words, nearly 7,000 ARRA projects have received funds and managed to complete a substantial amount of the work but are claiming not to have generated any jobs in the process. This is a worse performance than the previous quarter, when about 4,400 projects met these mystifying criteria.

Remember that since the second round, recipients are not asked to report jobs created or retained (which caused a great deal of confusion). They are supposed to simply add up all hours worked on ARRA-funded projects and divide the total by their definition of a full-time week.

Many recipients still seem confused about their job-reporting responsibilities. In the separate narrative field about jobs, many mention “no new jobs created” as the apparent reason for the zero in the job number column. Under the new rules, they should be counting everyone working on an ARRA project, even if the position is not a new or retained one.

In some cases the narratives even more directly contradict the zero in the job number field. For example, one recipient states: “This project employs 6 roofers, 2 laborers, 1 superintendent and 1 project manager.”

Recovery.gov reports the total number of “recovery jobs reported by recipients” in the latest quarter as 682,779. As with the previous quarters, one can only wonder how much higher the number would be if all recipients calculated their job numbers properly. Isn’t it time they were set straight?

Reposted from the STAR Coalition blog.

An ARRA Critic’s Flat-Earth Economic Views

April 28, 2010

Tom Pauken, the chairman of the Texas Workforce Commission, is causing a stir by challenging the Obama Administration’s recent claim that the Recovery Act is responsible for up to 2.8 million jobs through the first quarter of 2010. Pauken took particular umbrage at the estimate by the Council of Economic Advisers that Texas’s share was 205,000 jobs. “This claim is completely misleading and inaccurate,” Pauken declared. “There is no direct evidence that the Obama stimulus plan actually created any new private sector jobs in Texas.”

That last statement is a dead giveaway. It’s one thing to dispute the exact employment impact of ARRA. By claiming that the more than $11 billion paid out in stimulus funds in Texas (according to Recovery.gov) did not create a single job, Pauken is revealing himself to be a member of the hardcore conservative fraternity that believes government spending, because it depends on taxation, never creates jobs.

In fact, a few minutes of research reveals that Pauken, who was apparently speaking for himself rather than the Commission (its website press release archive does not contain Pauken’s ARRA statement), is in fact a rightwing ideologue. He worked in the Reagan Administration and later headed the Texas Republican Party. When Gov. Rick Perry named him to the Commission in 2008, Texas AFL-CIO President Becky Moeller blasted the appointment, saying that Pauken “has a long record of advocacy for right-wing views and even battled George W. Bush and John Cornyn because he thought they were too liberal.” His ARRA outspokenness may have something to do with the fact that Pauken has just published a new book called BRINGING AMERICA HOME that lays out his ultra-conservative creed.

Pauken’s personal views aside, it is worth noting that the Council of Economic Advisers admitted that its state-specific estimates of ARRA job impacts, which were issued separately from the Council’s formal quarterly Recovery Act report, should not be given too much weight, calling the disaggregated numbers “inherently more speculative and uncertain” than the national estimates. Remember that the Council is responsible for estimating national ARRA employment impacts using macroeconomic models, not counting warm bodies. The state breakdowns were apparently issued for political reasons.

You can question the specifics of the Council’s models and multipliers, but to state that ARRA spending has no positive employment effects on the private sector is flat-earth economics.

reposted from the STAR Coalition blog