economic development

R.I. subsidies’ standards rank 8th

‘STATES are spending billions of dollars per year on corporate tax credits, cash grants and other economic development subsidies that often require little if any job creation and lack wage and benefit standards covering workers at subsidized companies,’ said Good Jobs First.
Posted 12/13/11

PROVIDENCE – The job creation, wage, benefits and performance standards of Rhode Island’s economic development subsidies ranked eighth in the nation, according to a report released Wednesday.

“States are spending billions of dollars per year on corporate tax credits, cash grants and other economic development subsidies that often require little if any job creation and lack wage and benefit standards covering workers at subsidized companies,” said Good Jobs First, which describes itself as a resource center on economic development accountability.

The “Money for Something” report rated on a scale of 0 to 100 – with possible extra credit - the performance standards and job quality requirements of 238 subsidy programs from the 50 states and the District of Columbia, which collectively cost $11 billion a year.

“The days of ‘no strings attached’ are largely gone, but the fine print in many states is still full of gaps and loopholes,” said Good Jobs First Executive Director Greg LeRoy.

The top-rated states were Nevada, North Carolina and Vermont; those doing the worst were the District of Columbia, Alaska and Wyoming. Rhode Island tied for eighth with Florida. Massachusetts tied with New York at 43rd.

Locally, in 2008, The Poverty Institute and other accountability groups won “significant transparency reforms which require reporting on job creation, wage rates and fringe benefits as well as disclosure of economic impact statements on subsidies and the creation of a Unified Economic Development Budget. The recipient reporting was put into effect but the other provisions remain unfulfilled,” Good Jobs First said.

“The state’s subsidy and tax policies are greatly influenced by a handful of major companies – those long in the state as well as those recently lured from elsewhere. For example, Fidelity Investments brought in jobs from Massachusetts in the mid-1990s after Rhode Island state lowered taxes on financial services companies. Later it got Rhode Island to reduce taxes on executive bonuses and stock options. Drug store chain CVS got a special deal from Woonsocket and has made extensive use of state tax credits,” the organization said.

Good Jobs First looked at five Rhody programs, four of which had online disclosures. The Manufacturing and High Performance Manufacturing Investment Tax Credits (corporate income tax credits), which cost the state $17 million in 2010 was “still hidden,” it noted. The next most-expensive program was the Corporate Income Tax Rate Reduction for Job Creation, which came in at $14 million in 2011.

Rhode Island received 58 out of 100 points, with the Corporate Income Tax Rate Reduction for Job Creation earning all points in addition to extra credit while the Motion Picture Production Tax Credit, a $2.36 million investment in 2011, earned just 10 points.

Good Jobs First made three recommendations for subsidy standards:

  • Every subsidy should contain job creation, job retention or training requirements. Those should be strengthened by provisions barring employers from shifting existing jobs from other facilities and mandating that the jobs be kept in place for a minimum period.

  • Every job or training position in a subsidized facility should be covered by a wage standard, preferably tied to labor market averages and structured in a way that raises pay above market levels. They should also offer health coverage in which the employer contributes to the cost of the premium. These rules should also apply to part-time, temporary and contract workers.

  • Decent job standards do not guarantee that a program’s benefits will outweigh its costs. Sometimes the only sensible course of action is to eliminate a program altogether.

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