State Comptroller Kevin Lembo is renewing his calls for better oversight of the state’s economic incentives. He says the agency charged with handing out tax credits, grants and other perks shouldn’t be determining their effectiveness, which is how the current system essentially works.
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State Comptroller Kevin Lembo is renewing his calls for better oversight of the state's economic incentives. He says the agency charged with handing out tax credits, grants and other perks shouldn't be determining their effectiveness, which is how the current system essentially works.
We agree with him wholeheartedly.
Lembo is pitching a bill — similar to one passed by the House and Senate last year, but vetoed by Gov. Dannel P. Malloy — that would transfer the responsibility of evaluating the effectiveness of incentive programs from the state Department of Economic and Community Development (DECD) to the nonpartisan Auditors of Public Accounts.
Lembo, a Democrat, also wants to expand the scope of the evaluation to all state business incentive programs, including tax credits, tax abatements, loans, grants and any other assistance that aims to encourage economic development.
With hundreds of millions of dollars in economic-development incentives being doled out annually, Connecticut taxpayers deserve and need a more unbiased accounting of their effectiveness, particularly during times of fiscal crisis.
We've been skeptical of the Malloy administration's overreliance on corporate welfare, which has been a cornerstone of the governor's economic-development strategy to retain and grow jobs. While we understand the need to remain competitive with other states, many of which are also aggressively wooing companies with tax breaks and other benefits, the use of economic incentives is not a long term, job-growth strategy.
That's why any efforts to enhance oversight and analysis of such incentives is a good thing. Too often Connecticut has been criticized for not having enough data to make informed decisions about its budgets or economy. Lembo's proposal could help move the dial in the right direction.
Currently DECD handles most of the incentive deals doled out by the state and provides an assessment of their effectiveness.
The agency, for example, recently issued a report that said the combined $312 million it provided 15 companies as part of the state's “First Five Plus” program leveraged an additional $1.4 billion in private capital and has led to 3,750 jobs being created.
Those numbers seem positive, but we need an annual, third-party accounting of the most-used incentive programs to determine if taxpayers are truly getting the right return on investment. We also need public hearings on those findings.
Do we know, for example, if companies receiving aid packages would have added new jobs in the state even without the support? That may be a difficult question to answer, but is anyone in charge asking it?
We aren't — and Lembo isn't either — questioning the integrity of DECD or its commissioner Catherine Smith. For all we know, the agency is effectively overseeing its array of economic incentives, but we should not take their word for it.
Welcoming outside analysis is not only good government, but will help enhance the public's trust and confidence.
Businesses, of course, haven't always been open to greater transparency either. The business community has opposed previous attempts by lawmakers to require companies that receive incentives to divulge certain information, including their effective tax rates or investments in research and development.
If businesses were forced to disclose such information, which has been exempted from public disclosure for competitiveness reasons, companies would be less interested in participating in state programs, the argument goes.
We agree with that philosophy only to a certain extent. If companies are willing to take a government handout they must be open to more public scrutiny.
Sunlight is always the best disinfectant.
