economic development

R.I. 13th on enforcing subsidy requirements

COURTESY FLICKR / JOKERMAN
RHODE Island ranked 13th nationally in a report evaluating its diligence enforcing requirements set out by economic development programs.
Posted 1/18/12

WASHINGTON – Rhode Island ranked 13th nationally in a report evaluating its diligence enforcing requirements set out by economic development programs.

In the “Money-Back Guarantee for Taxpayers: Clawbacks and Other Enforcement Safeguards in State Economic Development Subsidy Programs,” released by the Washington-based research center Good Jobs First, Rhode Island earned a score of 57 out of 100 points.

“Rhode Island would have ranked near the top except that four of the five rated programs fail to even verify job creation or other public benefits claimed by recipient companies,” Good Jobs First said.

The latest report is a follow-up to its “Money for Something” study released Dec. 15, which focused on the job creation, wage, benefits and performance standards of the subsidies’ programs; Rhode Island ranked 8th on that one.

“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 those requirements diligently and consistently,” said Good Jobs First Executive Director Greg LeRoy.

The Motion Picture Production Tax Credit, $2.4 million in 2011, received the lowest score out of the five subsidies programs. However, it received the highest unweighted score.

It earned 70 out of 100 possible points for its scope of penalties, type of penalties, verification and reporting requirements. When Good Jobs First weighted in the program’s performance standards score on the Money for Something report, it was adjusted down to 40.

In the unweighted score, the Corporate Income Tax Rate Reduction for Job Creation, a $14.1 million program, received to lowest score – 45/100 - and the highest weighted score – 77/100.

The other three subsidies program scored: Enterprise Zone Tax Credits, 55; Manufacturing and High Performance Investment Tax Credits, 55; Job Training Tax Credit, 50.

The organization made three recommendations to “best protect taxpayers:”

  • All recipients in all programs should be required to report to agencies on job creation, wages, benefits and other performance benchmarks – and those reports should be verified by agencies using techniques including cross-checking of company claims against separate reliable data sources such as unemployment insurance records.

  • Agencies should penalize recipients found to be out of compliance, employing techniques such as recapture (clawbacks), recalibration of future benefits and rescission/termination of subsidy agreements. Programs that are performance-based should operate without penalties only if recipients are required to fulfill all programs requirements before receiving any subsidies.

  • Penalty systems should be straightforward and consistent and not weakened by subjective exceptions or official discretion on whether to implement them. Agencies should publish detailed online data on their enforcement activities.

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