Bill Would Increase Transparency, Clawbacks in Economic Development Spending
BOSTON – Long-overdue legislation to reform the way Massachusetts manages its economic development subsidy programs will be heard today by the Legislature’s Joint Committee on Revenue.
The bill, “An Act to Promote Transparency and Efficiency in Economic Development Spending” (H2565/S153) is sponsored by Senator Jamie Eldridge (D-Acton) and Representative Carl Sciortino (D-Medford), along with 49 other legislators from both chambers and both political parties.
“Massachusetts spends hundreds of millions of dollars each year on economic development subsidies – and yet legislators, the administration, and the general public often don’t know where that money is going, how many jobs are actually being created, and whether the Commonwealth is getting a good return on its investment,” said Senator Jamie Eldridge. “That’s unacceptable. It’s time to make all this information public, and start holding companies accountable for creating the jobs they promise to create.”
“This is an opportunity for legislators to stand on the side of our taxpaying constituents and put pressure on companies to follow through on their promises,” said Representative Carl Sciortino. “If a company agrees to create a certain number of jobs in exchange for a subsidy, and they fail, we should get our money back. This money can be used to subsidize more effective job creation elsewhere or be put towards crucial human services in our communities.”
The issue of transparency and, in particular, clawbacks for economic development spending has been getting more attention in recent months, following the layoff of 800 workers with the closure of the Evergreen Solar plant at Devens. The company, which received $58 million in state aid, including $21 million in direct cash grants, has said it is only contractually obligated to return $3 million to the state.
The Eldridge-Sciortino bill would:
- Greatly increase transparency in our economic development programs, so that the public and the legislature has a better understanding of what money is being spent, and what the Commonwealth is getting in return;
- Require companies receiving subsidies to make firm job commitment promises;
- Increase reporting and tracking to make sure those commitments are being met;
- Cap the maximum amount the state will give out for the creation of one FTE job at $35,000 (based on federal CDBG guidelines);
- Require companies that don’t meet their job creation commitments to return a pro-rated portion of the subsidy (clawbacks).
Testifying today in support of the bill will be numerous good-government watchdogs and advocates for community groups across the state. Notably, State Auditor Suzanne Bump will be testifying in person, and State Treasurer Steve Grossman will be submitting written testimony.
Also testifying (in person or in writing) will be Greg LeRoy, Executive Director of Good Jobs First, a Washington-DC based policy resource center that has studied the issue of economic development subsidies for many years; representatives from the Campaign for Our Communities, a coalition of community groups across the Commonwealth, including Harris Gruman, SEIU State Council, and Julie Johnson, Massachusetts Teachers’ Association; Robert Haynes, Massachusetts AFL-CIO; Deirdre Cummings, Mass PIRG; Reide Everett , Common Cause; Sondra Peskoe, One Massachusetts; Deborah Fastino, Coalition for Social Justice; and Jennifer Weiner, Senior Policy Analyst at the Federal Reserve Bank of Boston.
“Given the Evergreen Solar and Fidelity Investments setbacks, Massachusetts needs safeguards to protect taxpayer investments. The proposed accountability legislation is based on best practices from many other states and would help ensure that good jobs are created or else subsidies get refunded,” said Greg LeRoy of Good Jobs First.
“The best way to grow our state economy is to invest our tax revenues in good schools, affordable higher education, and our infrastructure,” said Harris Gruman, Co-Chair of the Campaign for Our Communities, a coalition of community groups across the Commonwealth. “If we are going to give corporations tax breaks, despite these other needs coming up short, there must be a reasonable level of certainty that they will be held accountable to the taxpayers for creating jobs. That’s why the Campaign for Our Communities is supporting these bills by Senator Eldridge and Representative Sciortino.”
“Massachusetts taxpayers deserve to know if the nearly two billion dollars we spend on tax breaks for big businesses are actually worthwhile. Businesses want us all to just take their word for it. This legislation will allow the state to demand that executives and companies answer for the millions we hand them. This legislation strengthens clawbacks, strengthens reporting, and allows us to get the data that will finally let us answer the questions: Is the $1.7 billion that we spend on economic development worth it? Is it really a good investment to spend $628 million more on these business tax giveaways than on higher education? We support economic development tax incentives so long as there is proof they kept up their end of the bargain,” said Robert J. Haynes, President, Massachusetts AFL-CIO.
“State and municipal investments of public dollars in private enterprises must be held to highest level of transparency and accountability in order to ensure the most efficient use of our limited and valuable tax dollars,” added Deirdre Cummings, Legislative Director for MASSPIRG.
The Revenue Committee hearing will begin at 10:30am in Hearing Room A-2. Auditor Bump is scheduled to testify at 11:00am; Senator Eldridge, Representative Sciortino and other legislators will testify at 11:30.
A summary of the bill can be found at: http://www.senatoreldridge.com/legislation/jamies-2011-2012-legislation/increasing-government-transparency-efficiency/s153h2565-an-act-to-promote-efficiency-and-transparency-in-economic-development.