August 31, 2009: Accountability, Take two

In last week’s Monday Minute we talked about the state organizations whose job it is to oversee how the state and its offshoots spend public money. In this Monday Minute we will talk about a law enacted in 2007 that was designed to improve the transparency and accountability of the state’s many programs to assist businesses.

The 2007 Development Subsidy Job Goals Accountability Act (The Act) was introduced in the 2004-2005 legislative session to provide information about business subsidies on a company level basis. An added provision of the early bill was that businesses would be required to pay back all or a portion of the subsidies they receive from the state if they fail to meet their job projections. This payback provision-called a clawback-had a limited life and was deleted from the bill because of business opposition.

The bill gained broad support in 2006 and 2007 when it was revealed that MSNBC was shutting down its Secaucus site. The problem with this particular shutdown was that MSNBC had been paid $7.8 million in state funds to hire workers in New Jersey, but now was moving these jobs to New York. New Jersey was the loser-the cable network worked out an agreement with the state that it would not pay back the full grant. In addition to the jobs grant, the state had issued $167.5 million in bonds to purchase equipment it then leased to MSNBC. The lease allowed MSNBC to avoid paying about $8 million in sales taxes on the equipment-those sales taxes also were not paid back. Elected officials were angry; Governor Corzine signed the bill into law in November 2007.

The Act required the state to report on all subsidies over $25,000 going forward and retroactively back to May 2005. This reporting, via initial subsidy applications and annual company-specific reporting, was to include how many workers businesses hired as a result of subsidies; the average annual salaries and benefits paid for the state subsidized jobs; and the number of these newly hired workers with health insurance. The law also required the State Treasurer to issue as part of the Governor’s annual budget a tax expenditure budget including a comprehensive list of all costs related to economic development subsidies by category of tax expenditure and geographical area. Further, the law required the State Treasurer to produce an annual company-specific Unified Development Budget listing tax expenditures greater than $100,000. The UDB was to include the names of companies, total value of tax expenditures received by those businesses, workers hired and the benefits and wages provided to those workers.

The bill required the state to produce the Unified Development Budget by October 2008 and the Tax Expenditure Budget by March 2009 but the state has yet to do either. And even though the state has not been able to figure out how to get companies to report on the use of the public funds they have received, the Legislature and the Governor have expanded the size and scope of the tax incentives, grants and other economic development subsidies the state is providing to the private sector.

At a time when state finances are at risk, it seems appropriate for the public to demand a full accounting of all funds diverted from public use to the private sector. It’s time for the state to meet the requirements of the law. It’s time to answer some questions with real research and data. Have state subsidies brought new businesses to New Jersey for the long term? Have job subsidies provided to businesses actually raised the living standards of New Jersey’s working families? Without accountability it is impossible to tell whether the state’s economic development program has been a boon or a bust. Without data we can’t tell.