Economic Development Association pushes back on criticism of state business subsidy programs
Earlier this month, the Equality State Policy Center joined with Good Jobs First to jointly release a report that points out how Wyoming fails to ask for reasonable returns on its business incentives and subsidies aimed at bringing new business to the state. The report ranks Wyoming 49th among the states on job-creation and job-quality standards.
The state’s efforts to diversify the Wyoming economy are well-intentioned and the goal is laudable. But the Good Jobs First (GJF) report shows clearly that the four state programs analyzed can be improved by incorporating specific job creation and job quality standards. Job quality standards include requiring companies to pay middle class wages and to provide health care and other benefits.
Whenever we raise questions about state programs, we expect to get push-back and we did in this case, too. The Wyoming Economic Development Association complained recently but did not address the specific criticism. It claimed that “… all of these programs have job criteria.”
The Good Jobs First report analyzed four state programs:
- Data Processing Center – sales/use tax exemption on computing equipment;
- Film Industry Financial Incentive;
- Sales and Use Tax Exemption for Purchases of Manufacturing Equipment;
- Workforce Development Training Fund.
One, the Workforce training program, has a good incentive. It makes more money available to companies that pay the mean county hourly wage. But companies still can qualify for training subsidies even if they’re providing training for low-wage work. The program scored poorly in the GJF report because it is not structured to require training of a certain number of workers.
Still, the ESPC supports worker training so long as the program establishes benchmarks to evaluate its effectiveness and aims it at raising the economic lives of workers by requiring employers who take public funds – subsidies that help their business – to pay living wages and provide good benefits.
The programs that deserve greater scrutiny and that should be modified to include job creation and job quality standards are the tax expenditure programs. Granting certain businesses exemptions to certain taxes gives them a competitive advantage over other enterprises. When the state does this, it should not hesitate to impose job creation and job quality standards. We don’t find any job creation or quality standards in these programs.
Wyoming’s Manufacturing Sales Tax Exemption program is expensive and in at least some cases, has operated directly counter to the goal of the program – creating jobs. In the last three years, nearly $610 million in equipment purchases have been exempted from the tax – both the state sales tax and local option taxes – costing state and local government about $32.3 million.
Most of those purchases were made by the refining industry in Wyoming, which bought equipment to upgrade technology at existing refineries. What did we get for it?
Some will argue that we’ve protected jobs at those refineries. Maybe so, but you have to wonder about the HollyFrontier Refinery in Cheyenne. It has eliminated 40 positions in the last two years, according to news stories based on company-supplied information.
Companies in the manufacturing sector typically offer some of the best pay and benefits found in the economy. Good operators that want to tap public funds to invest in their factories certainly will not balk at job quality and creation standards.
Gov. Mead has asked the Legislature to appropriate another $15 million to attract data processing centers and other high-tech businesses. Now’s the time for legislators to figure out how to help ensure that we reach the goals of bringing more and better jobs to Wyoming. The governor apparently intends to grant these funds to communities to invest in infrastructure preparing local sites for these businesses. Legislators should take the simple step of requiring communities to make job creation and job quality standards part of their incentive packages.
It’s reasonable to demand a fair return on public investment in the private sector.
(Good Jobs First is a national resource center that promotes corporate and government accountability in economic development and smart growth for working families. You can read the GJF press release here.)