S153/H2565: An Act to Promote Efficiency and Transparency in Economic Development

Lead Sponsors: Senator Jamie Eldridge & Rep. Carl Sciortino

Summary:   This bill would increase the efficiency of the state’s economic development agencies by collecting the performance management data we need to make informed decisions and ensure that our economic development dollars being spent as efficiently as possible, while strengthening our clawback authority to get taxpayer dollars back if a company breaks its promise.

Why This Matters:  Massachusetts invests heavily in economic development each year – and yet we currently lack the data necessary to assess total spending or to judge the impact of our economic development investments.

To increase the efficiency of the state’s economic development agencies, we need to be collecting the performance management data that will allow us to make informed decisions and ensure that our economic development dollars being spent as efficiently as possible. Quite simply, you can’t manage what you can’t measure.

We also need to ensure that every economic development deal includes strong accountability measures in the form of clawbacks.  If a company promises to create a certain number of jobs in exchange for a subsidy, and they fail, we should get our money back.

Without this level of transparency and accountability neither the public nor the legislature can have confidence that we are spending our economic development dollars wisely.

By providing for strong disclosure requirements and making data publicly available in a searchable database, this amendment would bring Massachusetts more in line with such states as Connecticut, Maine, Maryland, Ohio, Pennsylvania, New Jersey, New York, and Rhode Island that already have similar provisions in place.

What this Bill Would Do:

Require uniform data collection

Uniform reporting requirements would mean that every economic development program funded by the state would have the same data reporting requirements. Applicants would have to document their current in-state employment levels, salary and benefit structure to establish an objective benchmark from which to measure gains. Under this amendment:  

  • All proposals for assistance must include benchmark summaries of
    • The number of jobs prior to receiving assistance
    • Benefit levels (e.g. health insurance) provided current employees
    • Salary scale of current employees
  • Also required is a summary of proposed benefits to the Commonwealth
    • Number of new jobs to be created
    • Benefit levels for these new jobs
    • Wages scale for new jobs
  • Requires recipients to report on results annually for the life of the subsidy. 

Provide transparency

  • Requires the DOR to produce an annual unified economic development budget
    • Detailing tax reductions, tax credits and subsidies for economic development
    • Including all line item expenditures for any state-funded entity including quasi-public authorities
    • Local property tax abatements and reductions also included
  • Requires EOEHD to make all applications and reporting materials available to the public.  
  • DOR and EOEHD reports and supporting materials (applications, etc.) must be posted on the web in a searchable, easy to use format.

  Establishes standards and requires clawbacks when benefits are not met

  • If a company fails to meet its job creation commitments within two years, the state will be required to recapture (“clawback”) a pro-rated portion of the subsidy.
  • If a company fails to meet at least 90% of its job creation commitments for three consecutive years, the state will be required to recapture the entire subsidy amount.
  • Wages must remain at or above 85% of average wage for the industry and region (75% for small businesses). This encourages investment that produces living wage jobs.
  • The subsidy per permanent, full-time job may not exceed $35,000, which is the limit set for job creation when applying for federal Community Development Block Grants.
  • Section 12 empowers the Executive Office of Economic Development to waive the subsidy limit and job standards upon finding that there exist significant public policy goals apart from just job creation. The policy goals would have to be explicitly stated and become the basis of annual progress reports.