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North Carolina needs serious policy solutions that create real jobs, but if the new economic development legislation unveiled yesterday is the route the state is going, it looks like jobless workers are going to be kept waiting awhile.

After weeks of closed-door negotiations, the House unveiled the NC Competes Act (HB 117), legislation which included a provision doubling the amount of money the state could spend on the state’s primary business incentive program, the Job Development Investment Grant and renaming it the Job Growth Reimbursement Opportunities People Program. This program provides public dollars to “incentivize” private sector firms to create jobs and increase capital investment.

Unfortunately, the program has not always delivered on its promises, and until it is fixed, it is unlikely that spending more money on it will improve its effectiveness in creating jobs.

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News

For a second day in a row, inclement weather has cancelled numerous appropriation committee meetings that had been scheduled for today at the General Assembly. Legislators, like most of us, are waiting it out at home until temperatures can rise and clear away the icy patches on bridges and roadways.

With a few extra hours on their hands, House and Senate members may want to use this down time to read the latest report on incentives and economic development from the NC Justice Center.

Allan Freyer, the author of Picking Losers: Why the Majority of NC’s Incentive Programs End in Failure, explains that more than half of all firms receiving incentive awards from the state’s Job Development Investment Grant (JDIG) program have failed to live up to their promises of job creation, investment, or wages.

Click below to hear Freyer discuss his new report. To read the complete findings for yourself,  click here.

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News

As Chris Fitzsimon reported in this morning’s “Monday numbers,” analyst Allan Freyer of the N.C. Justice Center has released a new and damning report today on North Carolina’s business incentives programs. This is from the release that accompanied the report (“Picking Losers: Why the Majority of NC’s Incentives Programs End in Failure”):

“If North Carolina continues to use incentives to pick winners and losers in economic development, the state needs to do a much better job of picking winners. More than half of all firms receiving incentive awards from the state’s Job Development Investment Grant (JDIG) program since its inception in 2002 have failed to live up to their promises of job creation, investment, or wages. These failed projects have forced the Department of Commerce to cancel those grants and even occasionally take back funds already given to these underperforming firms, according to an analysis of program reports.

Given the troubling number of failed projects, now is not the time to accept recent proposals to expand JDIG and create a new “catalyst fund” for closing new incentive deals. All told, the state has cancelled 60 percent of JDIG projects after recipient firms failed to honor their promises, with even higher rates of failed projects in the rural and most economically distressed areas of state. The disparity in performance between projects in urban and rural counties is even more striking in light of the signifi cantly lower incentive investments made in those rural areas—rural counties are seeing more project failure despite having fewer and smaller investments.

To address these problems, legislators should resist adding to the state’s incentive programs and instead focus on strengthening the performance standards that hold recipient fi rms accountable for the promises they make. Without these critical accountability measures, each one of these unsuccessful projects would have continued to receive millions in public subsidies, despite failing to create promised jobs and investment. Additionally, policy makers should improve the evaluation process for prospective JDIG projects. Currently, the cost-benefit analysis every project must undergo is clearly letting too many bad projects slip through the cracks. Future incentive grants should go to firms in targeted industries that are poised for robust growth rather than those that are in decline, and grants should be designed to bring infrastructure development and job training resources to the rural counties that most need assistance. Lastly, there is no need to create a new “closing” fund because there is already a similarly designed incentive program that governors have traditionally used to help close projects—namely, the OneNC program.”

Click here to read the entire report.

NC Budget and Tax Center

Sharon DeckerThe unfortunate quest to privatize the state’s business recruitment and job creation efforts took a big step forward yesterday, when the Senate agreed to a House proposal creating a new nonprofit partnership to oversee much of the state’s economic development efforts.

This misguided proposal is a bad deal for North Carolina taxpayers, businesses, and workers—schemes for privatizing economic development have repeatedly proven to be ineffective at job creation, wasteful of taxpayer dollars, and prone to financial mismanagement, conflicts of interest and pay-to-play incentive granting, and the inability to raise private funds in many of the states where they’ve been tried.

The only good news is that the General Assembly finally ended up supporting the House-passed measure, which includes somewhat better taxpayer protections than the original Senate measure.

Perhaps most importantly, the House bill did not include a new incentive program for the film industry, an extra policy tacked onto the Senate version two weeks ago. Given ongoing controversy over the effectiveness of film incentives, the Commerce privatization bill was just not the appropriate place for creating an entirely new incentive program.

A second important improvement over the original Senate measure involves the inclusion of new ethics rules. While the Senate suggested allowing the new nonprofit to develop and implement its own code of ethics—potentially creating legal loopholes for problematic ethical behavior—the final House bill requires that all board members, officers, and staff members remain subject to the existing state ethics act, just like all other state appointees and employees. This will protect taxpayers from the kinds of ethics scandals that have plagued other states’ privatization efforts, as in Wisconsin, Florida, and Texas.

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NC Budget and Tax Center

Partial privatization of the N.C. Department of Commerce took another step closer to reality yesterday when the Economic Development and Global Oversight Committee (or EDGE Committee) reported out updated enabling legislation that authorizes the establishment of a nonprofit corporation to conduct significant pieces of the state’s business development activities. Using last year’s SB 127 as a template, the new version of the bill includes important changes—some for the better, some for the worse, and some that make us go “huh?”

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