Rhode island enacted SB 5894 (Chapter 151) on June 30, 2011. This appropriations legislation adds some additional accountability measures for a few of its credits and other incentives, as well as modifies its unified economic development reports. The additional data to be collected by the state for some incentives are details of employees hired. Specifically:
"On or before September 1, 2011, and every September 1 thereafter, the project lessee shall file an annual report with the tax administrator. Said report shall contain each full-time equivalent, part-time or seasonal employee’s name, social security number, date of hire, and hourly wage as of the immediately preceding July 1 and such other information deemed necessary by the tax administrator. The report shall be filed on a form and in a manner prescribed by the tax administrator."
Here is the rewritten provision calling for the unified economic development report:
"42-142-6. Annual unified economic development report. – (a) The director of the department of revenue shall, no later than January 15th of each state fiscal year, compile and publish, in printed and electronic form, including on the Internet, an annual unified economic development report which shall provide the following comprehensive information regarding the tax credits or other tax benefits conferred pursuant to sections 42-64-10, 44-63-3, 42-64.5-5, 42-64.3-1, and 44-31.2-6.1 during the preceding fiscal year:
(1) The name of each recipient of any such tax credit or other tax benefit; the dollar amount of each such tax credit or other tax benefit; and summaries of the number of full-time and part time jobs created or retained, an overview of benefits offered, and the degree to which job creation and retention, wage and benefit goals and requirements of recipient and related corporations, if any, have been met. The report shall include aggregate dollar amounts of each category of tax credit or other tax benefit; to the extent possible, the amounts of tax credits and other tax benefits by geographical area; the number of recipients within each category of tax credit or retained; overview of benefits offered; and the degree to which job creation and retention, wage and benefit rate goals and requirements have been met within each category of tax credit or other tax benefit;
(2) The cost to the state and the approving agency for each tax credit or other tax benefits conferred pursuant to sections 42-64-10, 44-63-3, 42-64.5-5, 42-64.3-1, and 44-31.2-6.1 during the preceding fiscal year;
(3) To the extent possible, the amounts of tax credits and other tax benefits by geographical area; and
(4) The extent to which any employees of and recipients of any such tax credits or other tax benefits has received RIte Care or RIte Share benefits or assistance.
(b) After the initial report, the division of taxation will perform reviews of each recipient of this tax credit or other tax benefits to ensure the accuracy of the employee data submitted. The
division of taxation will include a summary of the reviews performed along with any adjustments, modifications and/or allowable recapture of tax credit amounts and data included on prior year reports."
This level of detail is unusual among states. A unified economic development report is to provide information to help lawmakers and others understand how tax incentives are being used. I think more is needed. The above description just sounds like a collection of data. Although it is more than would otherwise exist, without some analysis, it won't have much meaning.
The tax credits should have a stated purpose and some appropriate assessment measure. For example, if it is a jobs credit, collect data on number of net jobs added by those claiming the credit, state employment changes, as well as comparisons to prior years and to other states. Did the state have higher employment increases than states not offering a jobs credit?
Vermont has been preparing unified economic development budget reports for a few years (here). Vermont's March 2011 report notes:
"It is important to have clear, attainable and measurable goals (outcomes) in order to have meaningful measures of success (performance) for relevant programs and activities. The Administration and the Legislature must work toward establishing clear sets of measureable goals for all new programs including those related to economic development. A review of the current programs and their stated goals shows that a majority of programs still have only broad goals which are often difficult to measure."
The authors note that this is a difficult task as often the outcomes are worded too broadly. To help remedy this problem, the state offered 2-day workshops on the "basics of outcomes, measures and methodology."
It's not easy. If the lawmakers say the credit is to encourage use of renewable energy, how can that be measured? How can it be determined if the credit caused created use of renewable energy beyond what would have happened without the credit?
Typically, either very broad, nonspecific goals are stated or perhaps none are stated. No company would do this. They would not try a new marketing strategy without stating the goals and how to measure if it meets their goals. The same should apply for government spending which often comes in the form of tax incentives.
What do you think?
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