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As the ongoing budget stalemate continues in the General Assembly, the Senate offered up this morning its latest version of the “NC Competes” bill, the mis-named economic development package that will likely do very little to make North Carolina genuinely competitive for private investment and job creation in the global economy. Like previous renditions of the package, today’s proposal just doubles down on tax cuts and corporate subsidy programs that have proven time and again to be ineffective at meaningfully growing our state’s economy. But it largely goes from bad to worse in terms of the state’s discretionary incentive programs.

In general, economic development incentives are not the most effective tool to promote meaningful job creation or widely shared economic prosperity. They tend to influence only a small number of firm location decisions and frequently end up going to the urban, wealthier areas that need incentive dollars the least in order to attract investment. And in North Carolina, the Job Development Investment Grant program—the state’s flagship incentive program—has failed to live up to its promises of job creation and investment in 60 percent of its projects.

The truth is that incentives just don’t play a major role in making our state competitive for business investment. While JDIG may play a role in luring a small number of businesses to the state, the program only accounts for a vanishingly small amount of the total number of businesses, jobs, and investment that come to North Carolina. Since the end of the recession, 95% of the jobs created, 92% of the growth in the number of businesses in the state, and 99% of the state’s GDP growth have occurred *without* investment from JDIG.

So it’s unfortunate that the Senate doubles down on this ineffective approach. Here are few of the most problematic provisions:

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Commentary

Following sharp questioning of Commerce Secretary Skvarla in a Senate Finance Committee hearing Tuesday, it was readily apparent that the Senate would take a different tack on economic development than the House, which passed its own much-criticized package last month. In a surprise press conference yesterday afternoon announcing their own “jobs package” , however, Senate leaders made it abundantly clear that “different” didn’t mean “better” when it comes to growing an economy that benefits everyone in the state. While the bill does take a few positive steps forward on improving our state’s incentive programs, on balance, the bad outweighs the good and does not represent the most effective approach to economic development.

Most importantly, the proposal doubles down on tax cuts and company-specific tax incentives, instead of policies that benefit companies by adding economic value to communities. We’ve known for decades that North Carolina’s competitive edge in the global economy rests on providing companies with the skilled workforce and infrastructure they need boost to their productivity and ensure long-term profitability.

Unfortunately, the proposed changes to the Job Development Investment Grant (JDIG) program ignore these time-tested strategies for robust economic development in favor of budget-busting tax cuts and corporate incentives that have proved more expensive and less effective than advertised. In fact, 60 percent of JDIG projects have failed to live up to their promises of job creation or investment since the program began in 2002, and JDIG is out of money because the state spent more than half the available funds on a single project in Charlotte.

At a time when North Carolina needs to create at least 400,000 new jobs just to meet the needs of growing population, now is not the time to double down on ineffective economic development.

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Commentary

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

N.C. Commerce Secretary Sharon Decker says the $22.5 million fund to recruit business to the state is nearly empty, with enough money left to cover one additional jobs project, according to the Triangle Business Journal.

Decker was speaking to a group of commercial real estate developers at the Umstead Hotel in Cary when she made her comments about the state’s Job Development Investments Grants (JDIG) program.

Lawmakers did not fund the incentive program at levels desired by state commerce leaders, and Gov. Pat McCrory has said he is considering calling lawmakers back to Raleigh before their scheduled start in January for the long session.

From the TBJ article:

“And without JDIG, we will not be competitive,” N.C. Commerce Secretary Sharon Decker told members of Research Triangle chapter of NAIOP at its meeting Nov. 7 at the Umstead in Cary.

The JDIG program, since its inception in 2002, has been used by state economic development recruiters to sweeten the pot for companies that are considering a major investment in North Carolina that would lead to the creation of net new jobs in the state.

JDIG has typically been reserved for the largest new jobs deals, and pay-outs are only made after the company reaches a minimum job creation goal. Local companies that have been awarded JDIG grants include MetLife, Ipreo, Sygenta Biotechnology, Allscripts Healthcare and HCL Technologies.

Decker warns that the state is dangerously close to losing its chance to even negotiate on potentially large job-producing deals, including three big economic development prospects that are considering expansion and relocation options in the Triangle that could add another 4,100 jobs in region

You can read the entire article here.