Fiscal conservatives often complain that one of the biggest problems with government – especially the government of a state that now officially has the highest tax burden in the country and that is ranked as one of the worst places on the continent to do business – is that it does not conduct itself in a businesslike way. It is, up to a point, a fair complaint and a good place to begin resolving it might be the way government, especially the government of this state, supports business.

In what has become an annual and valuable exercise to this end, the Maine Citizen Leadership Fund, the Portland-based public interest group, has just released a report on the effectiveness of state programs that subsidize business. Conducted, as in years past, by Boston economist Marc Breslow, the conclusion is that, while business decisions on investment are made with the expectation of bang for the buck, Maine taxpayer investment yields at best a feeble whimper.

The title of Mr. Breslow’s thorough study pretty much says it all: “Maine’s Economic Development Subsidies in 1998-99: Tax Credits Yield Few New Jobs at High Cost Per Job.” The supporting details, derived from state agency data and corporate disclosure forms, amply back up that assertion.

Maine taxpayers spent nearly $100 million in those two years (the last for which the data is available) on tax breaks and subsidies under the seven major state programs, yet the subsidized businesses grew jobs at a far lower rate than the statewide average – 2 percent compared to 5.4 percent.

And those jobs came at a high price. Full-time jobs created under the state’s two biggest tax credit programs – BETR (Business Equipment Tax Reimbursement) and TIF (Tax Increment Financing) cost a whopping $144,000 each, four times the federal standard tax-backed incentives. In contrast, the state’s two major job-training programs produced nearly twice as many jobs as BETR and TIF at the amazingly low cost of $1,400 each.

Further, there is no connection between the size BETR and TIF subsidies and the number of jobs gained. Of the 82 business that availed themselves of BETR during those two years, the majority (including Bangor Publishing Co.) did so modestly, under $50,000, and produced new jobs at just a few thousand dollars each, an investment taxpayers could quickly recoup. Nearly half, and this during an economic boom, lost jobs or had no gains. A handful of major recipients – International Paper, Fraser Papers, Georgia-Pacific Interface Interior Fabrics, Great Northern Papers and Conifer Industries – tapped taxpayers for more than $1 million (IP led at $6 million) and cut nearly 700 jobs.

Some companies that gained jobs, for instance, National Semiconductor and Brunswick Technologies, did so at costs in excess of $200,000 per job.

Clearly, Maine must do better, and the report offers, as it has in the past, several good policy suggestions to help ensure that public investment in business is done according to sound business practice and produces public benefit. It has to do with setting standards and measuring results.

Caps on the cost per job are needed. The federal standard of $35,000 per job over the lifetime of a subsidy is generous and should be adopted here. Maine law requires job goals, including number, type, wage and benefit levels, for six of its assistance programs, but not for its most expensive, BETR, an exception that is indefensible. Job creation requirements, such as a net increase within two years and a demonstrable public benefit, such as increased tax base, should be established and coupled with recapture provisions – repayment of the subsidy – if those conditions are not met. A common defense of subsidized job loss is that the loss would be greater without the subsidy. If so, a needs-testing process would require a company making that claim prove its case. A cost-benefit standard would allow subsidies only when there is reasonable expectation that new economic activity generated by a subsidy will outweigh its cost.

None of these suggestions are new. They all have, in fact, been adopted by states in far better economic health than Maine. Taxpayer investment in business is a fact of life that Maine was slow to learn. It simply cannot afford to lag behind in demanding a good return on investment. It’s just not good business.