H333 - Economic Development and Fiscal Accountability Act
Chief Sponsors: Rep. D’Amico, Sen. Eldridge
Additional Sponsors: Jehlen, Provost, Patrick, Creedon, Sciortino, Malia, Brownsberger, Quinn, Wolf, Rushing, Cabral, Scaccia, McMurtry, Callahan, Madden, O’Day, Turner, Rush, Sullivan
Massachusetts invests heavily in economic development each year. However, spending is fragmented across many agencies and authorities. It is therefore difficult to assess total spending or to judge the benefits. The Economic Development and Fiscal Accountability Act addresses both these issues.
1. Provides Transparency
- Requires the DOR to produce an annual unified economic development budget
- Detailing tax reductions, tax credits and subsidies for economic development
- Including all line item expenditures for any state-funded entity including quasi-public authorities
- Must be posted on the web
2. Requires uniform data collection
There currently exists a lack of uniform standards for measuring benefits. Authorities like MassDevelopment can cherry pick statistics and omit others when reporting accomplishments in order to secure continued funding. For example, job growth figures might include positions that were transferred from other locations in-state. Under the Act -
- All proposals for assistance must include benchmark summaries of
- The number of jobs prior to receiving assistance
- Benefit levels (e.g. health insurance) provided current employees
- Salary scale of current employees
- Also required is a summary of proposed benefits to the Commonwealth
- Number of new jobs to be created
- Benefit levels for these new jobs
- Wages scale for new jobs
- Requires recipients to report annually for two years
3. Establishes Standards and requires claw-backs when benefits are not met
- Wages must remain at or above 85% of average wage for the industry and region (75% for small businesses) This encourages spending that produces living wage jobs
- Employment may not be reduced by more than 10% over 5 years
- The subsidy per permanent, full-time job may not exceed $35,000, which is the limit set for job creation when applying for federal Community Development Block Grants.
- Section 12 empowers the Executive Office of Economic Development to waive the subsidy limit and job standards upon finding that there exist significant public policy goals apart from job creation. The policy goals would have to be explicitly stated and become the basis of annual progress reports.
Background
In April 2008 the WBZ I-Team studied the effectiveness of the 2007 MassDevelopment, Emerging Technologies Fund (ETF)
- Many funded proposals did not include hard job projections in spite of the stated intention of the enabling legislation that the purpose was for increased job creation
- Only 4 of 15 companies that did state job projections met their goals
- Advant Immunotherapeutics of Needham cut 15 jobs
- Aspen Aerogeis, Inc of Northborough saw a net loss of 3 jobs over 3 years (2005-7)
- Cytonome of South Boston projected 48 jobs (2005) but created none (2007)
- Spherics of Mansfield projected 21 jobs but lost 3 (2005-7)
- Middletown Areospace cut 15 of 120 jobs after receiving $2M loan
- Said Greg Leroy of Good Jobs First “If this was a venture capital company, I think the loan committee… would be dusting off their resumes.”
No uniform reporting. These state funded independent authorities have no real accountability. They have every incentive to cherry pick success stories and omit data on failures when reporting to the legislature in order to secure funding.
Uniform reporting requirements would mean that every economic development program funded by the state would have the same data reporting requirements. Applicants would have to document their current in-state employment levels, salary and benefit structure to establish an objective benchmark from which to measure gains.
Without this level of accountability neither the public nor the legislature can have confidence that we are spending our money wisely.
